1
FIRST DIVISION On February 13, 1998, the complaint filed by respondent
G.R. No. 156034 October 1, 2003
DELSAN TRANSPORT LINES, INC., petitioner,
vs. C & A construction, inc., respondent.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review under Rule 45 of the
Revised Rules of Court are the June 14, 2002 decision1 of
the Court of Appeals in CA-G.R. CV No. 59034, which
reversed the decision2 of the Regional Trial Court of Manila,
Branch 46, in Civil Case No. 95-75565, and its November 7,
2002 resolution3 denying petitioner’s motion for
reconsideration.
The undisputed facts reveal that respondent C & A
Construction, Inc. was engaged by the National Housing
Authority (NHA) to construct a deflector wall at the Vitas
Reclamation Area in Vitas, Tondo, Manila.4 The project was
completed in 1994 but it was not formally turned over to
NHA.
On October 9, 1994, M/V Delsan Express, a ship owned and
operated by petitioner Delsan Transport Lines, Inc.,
anchored at the Navotas Fish Port for the purpose of
installing a cargo pump and clearing the cargo oil tank. At
around 12:00 midnight of October 20, 1994, Captain
Demetrio T. Jusep of M/V Delsan Express received a report
from his radio head operator in Japan5 that a typhoon was
going to hit Manila6 in about eight (8) hours.7 At
approximately 8:35 in the morning of October 21, 1994,
Capt. Jusep tried to seek shelter at the North Harbor but
could not enter the area because it was already
congested.8 At 10:00 a.m., Capt. Jusep decided to drop
anchor at the vicinity of Vitas mouth, 4 miles away from a
Napocor power barge. At that time, the waves were already
reaching 8 to 10 feet high. Capt. Jusep ordered his crew to
go full ahead to counter the wind which was dragging the
ship towards the Napocor power barge. To avoid collision,
Capt. Jusep ordered a full stop of the vessel.9 He succeeded
in avoiding the power barge, but when the engine was re-
started and the ship was maneuvered full astern, it hit the
deflector wall constructed by respondent.10 The damage
caused by the incident amounted to P456,198.24.11
Respondent demanded payment of the damage from
petitioner but the latter refused to pay. Consequently,
respondent filed a complaint for damages with the Regional
Trial Court of Manila, Branch 46, which was docketed as
Civil Case No. 95-75565. In its answer, petitioner claimed
that the damage was caused by a fortuitous event.12
transfer the vessel only at 8:35 in the morning of October
was dismissed. The trial court ruled that petitioner was not
guilty of negligence because it had taken all the necessary
precautions to avoid the accident. Applying the "emergency
rule", it absolved petitioner of liability because the latter had
no opportunity to adequately weigh the best solution to a
threatening situation. It further held that even if the
maneuver chosen by petitioner was a wrong move, it cannot
be held liable as the cause of the damage sustained by
respondent was typhoon "Katring", which is an act of God.13
On appeal to the Court of Appeals, the decision of the trial
court was reversed and set aside.14 It found Capt. Jusep
guilty of negligence in deciding to transfer the vessel to the
North Harbor only at 8:35 a.m. of October 21, 1994 and thus
held petitioner liable for damages.
Hence, petitioner filed the instant petition contending that
Capt. Jusep was not negligent in waiting until 8:35 in the
morning of October 21, 1994 before transferring the vessel
to the North Harbor inasmuch as it was not shown that had
the transfer been made earlier, the vessel could have sought
shelter.15 It further claimed that it cannot be held vicariously
liable under Article 2180 of the Civil Code because
respondent failed to allege in the complaint that petitioner
was negligent in the selection and supervision of its
employees.16 Granting that Capt. Jusep was indeed guilty of
negligence, petitioner is not liable because it exercised due
diligence in the selection of Capt. Jusep who is a duly
licensed and competent Master Mariner.17
The issues to be resolved in this petition are as follows – (1)
Whether or not Capt. Jusep was negligent; (2) If yes,
whether or not petitioner is solidarily liable under Article
2180 of the Civil Code for the quasi-delict committed by
Capt. Jusep?
Article 2176 of the Civil Code provides that whoever by act
or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict. The test for
determining the existence of negligence in a particular case
may be stated as follows: Did the defendant in doing the
alleged negligent act use the reasonable care and caution
which an ordinary prudent person would have used in the
same situation? If not, then he is guilty of negligence.18
In the case at bar, the Court of Appeals was correct in
holding that Capt. Jusep was negligent in deciding to
21, 1994. As early as 12:00 midnight of October 20, 1994, he
received a report from his radio head operator in
Japan19 that a typhoon was going to hit Manila20 after 8
hours.21This, notwithstanding, he did nothing, until 8:35 in
the morning of October 21, 1994, when he decided to seek
shelter at the North Harbor, which unfortunately was
already congested. The finding of negligence cannot be
rebutted upon proof that the ship could not have sought
refuge at the North Harbor even if the transfer was done
earlier. It is not the speculative success or failure of a
decision that determines the existence of negligence in the
present case, but the failure to take immediate and
appropriate action under the circumstances. Capt. Jusep,
despite knowledge that the typhoon was to hit Manila in 8
hours, complacently waited for the lapse of more than 8
hours thinking that the typhoon might change
direction.22 He cannot claim that he waited for the sun to
rise instead of moving the vessel at midnight immediately
after receiving the report because of the difficulty of
traveling at night. The hour of 8:35 a.m. is way past sunrise.
Furthermore, he did not transfer as soon as the sun rose
because, according to him, it was not very cloudy23 and there
was no weather disturbance yet.24
When he ignored the weather report notwithstanding
reasonable foresight of harm, Capt. Jusep showed an
inexcusable lack of care and caution which an ordinary
prudent person would have observed in the same
situation.25Had he moved the vessel earlier, he could have
had greater chances of finding a space at the North Harbor
considering that the Navotas Port where they docked was
very near North Harbor.26 Even if the latter was already
congested, he would still have time to seek refuge in other
ports.
The trial court erred in applying the emergency rule. Under
this rule, one who suddenly finds himself in a place of
danger, and is required to act without time to consider the
best means that may be adopted to avoid the impending
danger, is not guilty of negligence, if he fails to adopt what
subsequently and upon reflection may appear to have been a
better method, unless the danger in which he finds himself
is brought about by his own negligence.27 Clearly, the
emergency rule is not applicable to the instant case because
the danger where Capt. Jusep found himself was caused by
his own negligence.
Anent the second issue, we find petitioner vicariously liable
for the negligent act of Capt. Jusep. Under Article 2180 of

the Civil Code an employer may be held solidarily liable for
the negligent act of his employee. Thus –
Art. 2180. The obligation imposed in Article 2176 is
demandable not only for one’s own acts or omissions, but
also for those of persons for whom one is responsible.
x x x x x x x x x Employers shall be liable for the damages
caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.x x x x x
xxxx
The responsibility treated of in this article shall cease when
the persons herein mentioned prove that they observed all
the diligence of a good father of a family to prevent damage.
Whenever an employee’s negligence causes damage or
injury to another, there instantly arises a presumption juris
tantum that the employer failed to exercise diligentissimi
patris families in the selection (culpa in eligiendo) or
supervision (culpa in vigilando) of its employees. To avoid
liability for a quasi-delict committed by his employee, an
employer must overcome the presumption by presenting
convincing proof that he exercised the care and diligence of
a good father of a family in the selection and supervision of
his employee. 28
There is no question that petitioner, who is the
owner/operator of M/V Delsan Express, is also the
employer of Capt. Jusep who at the time of the incident
acted within the scope of his duty. The defense raised by
petitioner was that it exercised due diligence in the selection
of Capt. Jusep because the latter is a licensed and competent
Master Mariner. It should be stressed, however, that the
required diligence of a good father of a family pertains not
only to the selection, but also to the supervision of
employees. It is not enough that the employees chosen be
competent and qualified, inasmuch as the employer is still
required to exercise due diligence in supervising its
employees.
In Fabre, Jr. v. Court of Appeals,29 it was held that due
diligence in supervision requires the formulation of rules
and regulations for the guidance of employees and the
issuance of proper instructions as well as actual
implementation and monitoring of consistent compliance
with the rules. Corollarily, in Ramos v. Court of
Appeals,30 the Court stressed that once negligence on the
part of the employees is shown, the burden of proving that
he observed the diligence in the selection and supervision of
its employees shifts to the employer.
In the case at bar, however, petitioner presented no
evidence that it formulated rules/guidelines for the proper
performance of functions of its employees and that it strictly
implemented and monitored compliance therewith. Failing
to discharge the burden, petitioner should therefore be held
liable for the negligent act of Capt. Jusep.
So also, petitioner cannot disclaim liability on the basis of
respondent’s failure to allege in its complaint that the
former did not exercise due diligence in the selection and
supervision of its employees. In Viron Transportation Co.,
Inc. v. Delos Santos,31 it was held that it is not necessary to
state that petitioner was negligent in the supervision or
selection of its employees, inasmuch as its negligence is
presumed by operation of law. Allegations of negligence
against the employee and that of an employer-employee
relation in the complaint are enough to make out a case
of quasi-delict under Article 2180 of the Civil Code.32
Considering that petitioner did not assail the damages
awarded by the trial court, we find no reason to alter the
same. The interest imposed should, however, be modified.
In Eastern Shipping Lines, Inc. v. Court of Appeals,33 it was
held that the rate of interest on obligations not constituting
a loan or forbearance of money is six percent (6%) per
annum. If the purchase price can be established with
certainty at the time of the filing of the complaint, the six
percent (6%) interest should be computed from the date the
complaint was filed until finality of the decision. After the
judgment becomes final and executory until the obligation is
satisfied, the amount due shall earn interest at 12% per year,
the interim period being deemed equivalent to a
forbearance of credit.34
Accordingly, the amount of P456,198.27 due the respondent
shall earn 6% interest per annum from October 3, 1995 until
the finality of this decision. If the adjudged principal and the
interest (or any part thereof) remain unpaid thereafter, the
interest rate shall be twelve percent (12%) per annum
computed from the time the judgment becomes final and
executory until it is fully satisfied.
WHEREFORE, in view of all the foregoing, the instant
petition is DENIED. The June 14, 2002 decision of the
Court of Appeals in CA-G.R. CV No. 59034 ordering
petitioner Delsan Transport Lines, Inc., to pay respondent C
& A Construction, Inc., damages in the amount of
2
P456,198.27, plus P30,000.00 as attorney’s fees, is
AFFIRMED with the MODIFICATION that the award of
P456,198.27 shall earn interest at the rate of 6% per annum
from October 3, 1995, until finality of this decision, and 12%
per annum thereafter on the principal and interest (or any
part thereof) until full payment.
SO ORDERED.
SECOND DIVISION
G.R. No. 121413 January 29, 2001
PHILIPPINE COMMERCIAL INTERNATIONAL
BANK (formerly INSULAR BANK OF ASIA AND
AMERICA),petitioner,
vs. COURT OF APPEALS and FORD PHILIPPINES,
INC. and CITIBANK, N.A., respondents.
G.R. No. 121479 January 29, 2001
FORD PHILIPPINES, INC., petitioner-plaintiff,
vs.
COURT OF APPEALS and CITIBANK, N.A. and PHILIPPINE
COMMERCIAL INTERNATIONAL BANK, respondents.
G.R. No. 128604 January 29, 2001
FORD PHILIPPINES, INC., petitioner,
vs.
CITIBANK, N.A., PHILIPPINE COMMERCIAL INTERNATIONAL
BANK and COURT OF APPEALS, respondents.
QUISUMBING, J.:
These consolidated petitions involve several fraudulently
negotiated checks.
The original actions a quo were instituted by Ford
Philippines to recover from the drawee bank, CITIBANK,
N.A. (Citibank) and collecting bank, Philippine Commercial
International Bank (PCIBank) [formerly Insular Bank of
Asia and America], the value of several checks payable to
the Commissioner of Internal Revenue, which were
embezzled allegedly by an organized syndicate.1âwphi1.nêt
G.R. Nos. 121413 and 121479 are twin petitions for review of
the March 27, 1995 Decision1 of the Court of Appeals in CA-
G.R. CV No. 25017, entitled "Ford Philippines, Inc. vs.
Citibank, N.A. and Insular Bank of Asia and America (now
Philipppine Commercial International Bank), and the
August 8, 1995 Resolution,2 ordering the collecting bank,
Philippine Commercial International Bank, to pay the
amount of Citibank Check No. SN-04867.
In G.R. No. 128604, petitioner Ford Philippines assails the
October 15, 1996 Decision3 of the Court of Appeals and its
March 5, 1997 Resolution4 in CA-G.R. No. 28430 entitled
"Ford Philippines, Inc. vs. Citibank, N.A. and Philippine
Commercial International Bank," affirming in toto the
judgment of the trial court holding the defendant drawee
bank, Citibank, N.A., solely liable to pay the amount of

P12,163,298.10 as damages for the misapplied proceeds of
the plaintiff's Citibanl Check Numbers SN-10597 and 16508.
I. G.R. Nos. 121413 and 121479
The stipulated facts submitted by the parties as accepted by
the Court of Appeals are as follows:
"On October 19, 1977, the plaintiff Ford drew and issued its
Citibank Check No. SN-04867 in the amount of
P4,746,114.41, in favor of the Commissioner of Internal
Revenue as payment of plaintiff;s percentage or
manufacturer's sales taxes for the third quarter of 1977.
The aforesaid check was deposited with the degendant IBAA
(now PCIBank) and was subsequently cleared at the Central
Bank. Upon presentment with the defendant Citibank, the
proceeds of the check was paid to IBAA as collecting or
depository bank.
The proceeds of the same Citibank check of the plaintiff was
never paid to or received by the payee thereof, the
Commissioner of Internal Revenue.
As a consequence, upon demand of the Bureau and/or
Commissioner of Internal Revenue, the plaintiff was
compelled to make a second payment to the Bureau of
Internal Revenue of its percentage/manufacturers' sales
taxes for the third quarter of 1977 and that said second
payment of plaintiff in the amount of P4,746,114.41 was
duly received by the Bureau of Internal Revenue.
It is further admitted by defendant Citibank that during the
time of the transactions in question, plaintiff had been
maintaining a checking account with defendant Citibank;
that Citibank Check No. SN-04867 which was drawn and
issued by the plaintiff in favor of the Commissioner of
Internal Revenue was a crossed check in that, on its face
were two parallel lines and written in between said lines was
the phrase "Payee's Account Only"; and that defendant
Citibank paid the full face value of the check in the amount
of P4,746,114.41 to the defendant IBAA.
It has been duly established that for the payment of
plaintiff's percentage tax for the last quarter of 1977, the
Bureau of Internal Revenue issued Revenue Tax Receipt No.
18747002, dated October 20, 1977, designating therein in
Muntinlupa, Metro Manila, as the authorized agent bank of
Metrobanl, Alabang branch to receive the tax payment of
the plaintiff.
On December 19, 1977, plaintiff's Citibank Check No. SN-
04867, together with the Revenue Tax Receipt No.
18747002, was deposited with defendant IBAA, through its
Ermita Branch. The latter accepted the check and sent it to
the Central Clearing House for clearing on the samd day,
with the indorsement at the back "all prior indorsements
and/or lack of indorsements guaranteed." Thereafter,
defendant IBAA presented the check for payment to
defendant Citibank on same date, December 19, 1977, and
the latter paid the face value of the check in the amount of
P4,746,114.41. Consequently, the amount of P4,746,114.41
was debited in plaintiff's account with the defendant
Citibank and the check was returned to the plaintiff.
Upon verification, plaintiff discovered that its Citibank
Check No. SN-04867 in the amount of P4,746,114.41 was
not paid to the Commissioner of Internal Revenue. Hence,
in separate letters dated October 26, 1979, addressed to the
defendants, the plaintiff notified the latter that in case it will
be re-assessed by the BIR for the payment of the taxes
covered by the said checks, then plaintiff shall hold the
defendants liable for reimbursement of the face value of the
same. Both defendants denied liability and refused to pay.
In a letter dated February 28, 1980 by the Acting
Commissioner of Internal Revenue addressed to the
plaintiff - supposed to be Exhibit "D", the latter was
officially informed, among others, that its check in the
amount of P4, 746,114.41 was not paid to the government or
its authorized agent and instead encashed by unauthorized
persons, hence, plaintiff has to pay the said amount within
fifteen days from receipt of the letter. Upon advice of the
plaintiff's lawyers, plaintiff on March 11, 1982, paid to the
Bureau of Internal Revenue, the amount of P4,746,114.41,
representing payment of plaintiff's percentage tax for the
third quarter of 1977.
As a consequence of defendant's refusal to reimburse
plaintiff of the payment it had made for the second time to
the BIR of its percentage taxes, plaintiff filed on January 20,
1983 its original complaint before this Court.
On December 24, 1985, defendant IBAA was merged with
the Philippine Commercial International Bank (PCI Bank)
with the latter as the surviving entity.
3
Defendant Citibank maintains that; the payment it made of
plaintiff's Citibank Check No. SN-04867 in the amount of
P4,746,114.41 "was in due course"; it merely relied on the
clearing stamp of the depository/collecting bank, the
defendant IBAA that "all prior indorsements and/or lack of
indorsements guaranteed"; and the proximate cause of
plaintiff's injury is the gross negligence of defendant IBAA
in indorsing the plaintiff's Citibank check in question.
It is admitted that on December 19, 1977 when the proceeds
of plaintiff's Citibank Check No. SN-048867 was paid to
defendant IBAA as collecting bank, plaintiff was
maintaining a checking account with defendant Citibank."5
Although it was not among the stipulated facts, an
investigation by the National Bureau of Investigation (NBI)
revealed that Citibank Check No. SN-04867 was recalled by
Godofredo Rivera, the General Ledger Accountant of Ford.
He purportedly needed to hold back the check because there
was an error in the computation of the tax due to the Bureau
of Internal Revenue (BIR). With Rivera's instruction,
PCIBank replaced the check with two of its own Manager's
Checks (MCs). Alleged members of a syndicate later
deposited the two MCs with the Pacific Banking
Corporation.
Ford, with leave of court, filed a third-party complaint
before the trial court impleading Pacific Banking
Corporation (PBC) and Godofredo Rivera, as third party
defendants. But the court dismissed the complaint against
PBC for lack of cause of action. The course likewise
dismissed the third-party complaint against Godofredo
Rivera because he could not be served with summons as the
NBI declared him as a "fugitive from justice".
On June 15, 1989, the trial court rendered its decision, as
follows:
"Premises considered, judgment is hereby rendered as
follows:
"1. Ordering the defendants Citibank and IBAA (now PCI
Bank), jointly and severally, to pay the plaintiff the amount
of P4,746,114.41 representing the face value of plaintiff's
Citibank Check No. SN-04867, with interest thereon at the
legal rate starting January 20, 1983, the date when the
original complaint was filed until the amount is fully paid,
plus costs;

"2. On defendant Citibank's cross-claim: ordering the cross-
defendant IBAA (now PCI Bank) to reimburse defendant
Citibank for whatever amount the latter has paid or may pay
to the plaintiff in accordance with next preceding
paragraph;
"3. The counterclaims asserted by the defendants against
the plaintiff, as well as that asserted by the cross-defendant
against the cross-claimant are dismissed, for lack of merits;
and
"4. With costs against the defendants.
SO ORDERED."6
Not satisfied with the said decision, both defendants,
Citibank and PCIBank, elevated their respective petitions
for review on certiorari to the Courts of Appeals. On March
27, 1995, the appellate court issued its judgment as follows:
"WHEREFORE, in view of the foregoing, the court
AFFIRMS the appealed decision with modifications.
The court hereby renderes judgment:
1. Dismissing the complaint in Civil Case No. 49287
insofar as defendant Citibank N.A. is concerned;
2. Ordering the defendant IBAA now PCI Bank to pay the
plaintiff the amount of P4,746,114.41 representing the face
value of plaintiff's Citibank Check No. SN-04867, with
interest thereon at the legal rate starting January 20, 1983,
the date when the original complaint was filed until the
amount is fully paid;
3. Dismissing the counterclaims asserted by the defendants
against the plaintiff as well as that asserted by the cross-
defendant against the cross-claimant, for lack of merits.
Costs against the defendant IBAA (now PCI Bank).
IT IS SO ORDERED."7
PCI Bank moved to reconsider the above-quoted decision of
the Court of Appeals, while Ford filed a "Motion for Partial
Reconsideration." Both motions were denied for lack of
merit.
Separately, PCIBank and Ford filed before this Court,
petitions for review by certiorari under Rule 45.
In G.R. No. 121413, PCIBank seeks the reversal of the
decision and resolution of the Twelfth Division of the Court
of Appeals contending that it merely acted on the
instruction of Ford and such casue of action had already
prescribed.
PCIBank sets forth the following issues for consideration:
I. Did the respondent court err when, after finding that the
petitioner acted on the check drawn by respondent Ford on
the said respondent's instructions, it nevertheless found the
petitioner liable to the said respondent for the full amount
of the said check.
II. Did the respondent court err when it did not find
prescription in favor of the petitioner.8
In a counter move, Ford filed its petition docketed as G.R.
No. 121479, questioning the same decision and resolution of
the Court of Appeals, and praying for the reinstatement in
toto of the decision of the trial court which found both
PCIBank and Citibank jointly and severally liable for the
loss.
In G.R. No. 121479, appellant Ford presents the following
propositions for consideration:
I. Respondent Citibank is liable to petitioner Ford
considering that:
1. As drawee bank, respondent Citibank owes to petitioner
Ford, as the drawer of the subject check and a depositor of
respondent Citibank, an absolute and contractual duty to
pay the proceeds of the subject check only to the payee
thereof, the Commissioner of Internal Revenue.
2. Respondent Citibank failed to observe its duty as banker
with respect to the subject check, which was crossed and
payable to "Payee's Account Only."
3. Respondent Citibank raises an issue for the first time on
appeal; thus the same should not be considered by the
Honorable Court.
4. As correctly held by the trial court, there is no evidence of
gross negligence on the part of petitioner Ford.9
II. PCI Bank is liable to petitioner Ford considering that:
1. There were no instructions from petitioner Ford to deliver
the proceeds of the subject check to a person other than the
4
payee named therein, the Commissioner of the Bureau of
Internal Revenue; thus, PCIBank's only obligation is to
deliver the proceeds to the Commissioner of the Bureau of
Internal Revenue.10
2. PCIBank which affixed its indorsement on the subject
check ("All prior indorsement and/or lack of indorsement
guaranteed"), is liable as collecting bank.11
3. PCIBank is barred from raising issues of fact in the
instant proceedings.12
4. Petitioner Ford's cause of action had not prescribed.13
II. G.R. No. 128604
The same sysndicate apparently embezzled the proceeds of
checks intended, this time, to settle Ford's percentage taxes
appertaining to the second quarter of 1978 and the first
quarter of 1979.
The facts as narrated by the Court of Appeals are as follows:
Ford drew Citibank Check No. SN-10597 on July 19, 1978 in
the amount of P5,851,706.37 representing the percentage
tax due for the second quarter of 1978 payable to the
Commissioner of Internal Revenue. A BIR Revenue Tax
Receipt No. 28645385 was issued for the said purpose.
On April 20, 1979, Ford drew another Citibank Check No.
SN-16508 in the amount of P6,311,591.73, representing the
payment of percentage tax for the first quarter of 1979 and
payable to the Commissioner of Internal Revenue. Again a
BIR Revenue Tax Receipt No. A-1697160 was issued for the
said purpose.
Both checks were "crossed checks" and contain two diagonal
lines on its upper corner between, which were written the
words "payable to the payee's account only."
The checks never reached the payee, CIR. Thus, in a letter
dated February 28, 1980, the BIR, Region 4-B, demanded
for the said tax payments the corresponding periods above-
mentioned.
As far as the BIR is concernced, the said two BIR Revenue
Tax Receipts were considered "fake and spurious". This
anomaly was confirmed by the NBI upon the initiative of the

BIR. The findings forced Ford to pay the BIR a new, while
an action was filed against Citibank and PCIBank for the
recovery of the amount of Citibank Check Numbers SN-
10597 and 16508.
The Regional Trial Court of Makati, Branch 57, which tried
the case, made its findings on the modus operandi of the
syndicate, as follows:
"A certain Mr. Godofredo Rivera was employed by the
plaintiff FORD as its General Ledger Accountant. As such,
he prepared the plaintiff's check marked Ex. 'A' [Citibank
Check No. Sn-10597] for payment to the BIR. Instead,
however, fo delivering the same of the payee, he passed on
the check to a co-conspirator named Remberto Castro who
was a pro-manager of the San Andres Branch of PCIB.* In
connivance with one Winston Dulay, Castro himself
subsequently opened a Checking Account in the name of a
fictitious person denominated as 'Reynaldo reyes' in the
Meralco Branch of PCIBank where Dulay works as Assistant
Manager.
After an initial deposit of P100.00 to validate the account,
Castro deposited a worthless Bank of America Check in
exactly the same amount as the first FORD check (Exh. "A",
P5,851,706.37) while this worthless check was coursed
through PCIB's main office enroute to the Central Bank for
clearing, replaced this worthless check with FORD's Exhibit
'A' and accordingly tampered the accompanying documents
to cover the replacement. As a result, Exhibit 'A' was cleared
by defendant CITIBANK, and the fictitious deposit account
of 'Reynaldo Reyes' was credited at the PCIB Meralco
Branch with the total amount of the FORD check Exhibit 'A'.
The same method was again utilized by the syndicate in
profiting from Exh. 'B' [Citibank Check No. SN-16508]
which was subsequently pilfered by Alexis Marindo, Rivera's
Assistant at FORD.
From this 'Reynaldo Reyes' account, Castro drew various
checks distributing the sahres of the other participating
conspirators namely (1) CRISANTO BERNABE, the
mastermind who formulated the method for the
embezzlement; (2) RODOLFO R. DE LEON a customs
broker who negotiated the initial contact between Bernabe,
FORD's Godofredo Rivera and PCIB's Remberto Castro; (3)
JUAN VASTILLO who assisted de Leon in the initial
arrangements; (4) GODOFREDO RIVERA, FORD's
accountant who passed on the first check (Exhibit "A") to
Castro; (5) REMERTO CASTRO, PCIB's pro-manager at San
Andres who performed the switching of checks in the
clearing process and opened the fictitious Reynaldo Reyes
account at the PCIB Meralco Branch; (6) WINSTON
DULAY, PCIB's Assistant Manager at its Meralco Branch,
who assisted Castro in switching the checks in the clearing
process and facilitated the opening of the fictitious Reynaldo
Reyes' bank account; (7) ALEXIS MARINDO, Rivera's
Assistant at FORD, who gave the second check (Exh. "B") to
Castro; (8) ELEUTERIO JIMENEZ, BIR Collection Agent
who provided the fake and spurious revenue tax receipts to
make it appear that the BIR had received FORD's tax
payments.
Several other persons and entities were utilized by the
syndicate as conduits in the disbursements of the proceeds
of the two checks, but like the aforementioned participants
in the conspiracy, have not been impleaded in the present
case. The manner by which the said funds were distributed
among them are traceable from the record of checks drawn
against the original "Reynaldo Reyes" account and
indubitably identify the parties who illegally benefited
therefrom and readily indicate in what amounts they did
so."14
On December 9, 1988, Regional Trial Court of Makati,
Branch 57, held drawee-bank, Citibank, liable for the value
of the two checks while adsolving PCIBank from any
liability, disposing as follows:
"WHEREFORE, judgment is hereby rendered sentencing
defendant CITIBANK to reimburse plaintiff FORD the total
amount of P12,163,298.10 prayed for in its complaint, with
6% interest thereon from date of first written demand until
full payment, plus P300,000.00 attorney's fees and
expenses litigation, and to pay the defendant, PCIB (on its
counterclaim to crossclaim) the sum of P300,000.00 as
attorney's fees and costs of litigation, and pay the costs.
SO ORDERED."15
Both Ford and Citibank appealed to the Court of Appeals
which affirmed, in toto, the decision of the trial court.
Hence, this petition.
Petitioner Ford prays that judgment be rendered setting
aside the portion of the Court of Appeals decision and its
resolution dated March 5, 1997, with respect to the
dismissal of the complaint against PCIBank and holding
Citibank solely responsible for the proceeds of Citibank
Check Numbers SN-10597 and 16508 for P5,851,706.73 and
P6,311,591.73 respectively.
5
Ford avers that the Court of Appeals erred in dismissing the
complaint against defendant PCIBank considering that:
I. Defendant PCIBank was clearly negligent when it failed to
exercise the diligence required to be exercised by it as a
banking insitution.
II. Defendant PCIBank clearly failed to observe the diligence
required in the selection and supervision of its officers and
employees.
III. Defendant PCIBank was, due to its negligence, clearly
liable for the loss or damage resulting to the plaintiff Ford as
a consequence of the substitution of the check consistent
with Section 5 of Central Bank Circular No. 580 series of
1977.
IV. Assuming arguedo that defedant PCIBank did not
accept, endorse or negotiate in due course the subject
checks, it is liable, under Article 2154 of the Civil Code, to
return the money which it admits having received, and
which was credited to it its Central bank account.16
The main issue presented for our consideration by these
petitions could be simplified as follows: Has petitioner Ford
the right to recover from the collecting bank (PCIBank) and
the drawee bank (Citibank) the value of the checks intended
as payment to the Commissioner of Internal Revenue? Or
has Ford's cause of action already prescribed?
Note that in these cases, the checks were drawn against the
drawee bank, but the title of the person negotiating the
same was allegedly defective because the instrument was
obtained by fraud and unlawful means, and the proceeds of
the checks were not remitted to the payee. It was established
that instead of paying the checks to the CIR, for the
settlement of the approprite quarterly percentage taxes of
Ford, the checks were diverted and encashed for the
eventual distribution among the mmbers of the syndicate.
As to the unlawful negotiation of the check the applicable
law is Section 55 of the Negotiable Instruments Law (NIL),
which provides:
"When title defective -- The title of a person who negotiates
an instrument is defective within the meaning of this Act
when he obtained the instrument, or any signature thereto,
by fraud, duress, or fore and fear, or other unlawful means,
or for an illegal consideration, or when he negotiates it in
breach of faith or under such circumstances as amount to a
fraud."

Pursuant to this provision, it is vital to show that the
negotiation is made by the perpetator in breach of faith
amounting to fraud. The person negotiating the checks must
have gone beyond the authority given by his principal. If the
principal could prove that there was no negligence in the
performance of his duties, he may set up the personal
defense to escape liability and recover from other parties
who. Though their own negligence, alowed the commission
of the crime.
In this case, we note that the direct perpetrators of the
offense, namely the embezzlers belonging to a syndicate, are
now fugitives from justice. They have, even if temporarily,
escaped liability for the embezzlement of millions of pesos.
We are thus left only with the task of determining who of
the present parties before us must bear the burden of loss of
these millions. It all boils down to thequestion of liability
based on the degree of negligence among the parties
concerned.
Foremost, we must resolve whether the injured party, Ford,
is guilty of the "imputed contributory negligence" that
would defeat its claim for reimbursement, bearing ing mind
that its employees, Godofredo Rivera and Alexis Marindo,
were among the members of the syndicate.
Citibank points out that Ford allowed its very own
employee, Godofredo Rivera, to negotiate the checks to his
co-conspirators, instead of delivering them to the
designated authorized collecting bank (Metrobank-Alabang)
of the payee, CIR. Citibank bewails the fact that Ford was
remiss in the supervision and control of its own employees,
inasmuch as it only discovered the syndicate's activities
through the information given by the payee of the checks
after an unreasonable period of time.
PCIBank also blames Ford of negligence when it allegedly
authorized Godofredo Rivera to divert the proceeds of
Citibank Check No. SN-04867, instead of using it to pay the
BIR. As to the subsequent run-around of unds of Citibank
Check Nos. SN-10597 and 16508, PCIBank claims that the
proximate cause of the damge to Ford lies in its own officers
and employees who carried out the fradulent schemes and
the transactions. These circumstances were not checked by
other officers of the company including its comptroller or
internal auditor. PCIBank contends that the inaction of Ford
despite the enormity of the amount involved was a sheer
negligence and stated that, as between two innocent
persons, one of whom must suffer the consequences of a
breach of trust, the one who made it possible, by his act of
negligence, must bear the loss.
For its part, Ford denies any negligence in the performance
of its duties. It avers that there was no evidence presented
before the trial court showing lack of diligence on the part of
Ford. And, citing the case of Gempesaw vs. Court of
Appeals,17 Ford argues that even if there was a finding
therein that the drawer was negligent, the drawee bank was
still ordered to pay damages.
Furthermore, Ford contends the Godofredo rivera was not
authorized to make any representation in its behalf,
specifically, to divert the proceeds of the checks. It adds that
Citibank raised the issue of imputed negligence against Ford
for the first time on appeal. Thus, it should not be
considered by this Court.
On this point, jurisprudence regarding the imputed
negligence of employer in a master-servant relationship is
instructive. Since a master may be held for his servant's
wrongful act, the law imputes to the master the act of the
servant, and if that act is negligent or wrongful and
proximately results in injury to a third person, the
negligence or wrongful conduct is the negligence or
wrongful conduct of the master, for which he is liable.18 The
general rule is that if the master is injured by the negligence
of a third person and by the concuring contributory
negligence of his own servant or agent, the latter's
negligence is imputed to his superior and will defeat the
superior's action against the third person, asuming, of
course that the contributory negligence was the proximate
cause of the injury of which complaint is made.19
Accordingly, we need to determine whether or not the
action of Godofredo Rivera, Ford's General Ledger
Accountant, and/or Alexis Marindo, his assistant, was the
proximate cause of the loss or damage. AS defined,
proximate cause is that which, in the natural and
continuous sequence, unbroken by any efficient, intervening
cause produces the injury and without the result would not
have occurred.20
It appears that although the employees of Ford initiated the
transactions attributable to an organized syndicate, in our
view, their actions were not the proximate cause of
encashing the checks payable to the CIR. The degree of
Ford's negligence, if any, could not be characterized as the
proximate cause of the injury to the parties.
The Board of Directors of Ford, we note, did not confirm the
request of Godofredo Rivera to recall Citibank Check No.
SN-04867. Rivera's instruction to replace the said check
6
with PCIBank's Manager's Check was not in theordinary
course of business which could have prompted PCIBank to
validate the same.
As to the preparation of Citibank Checks Nos. SN-10597 and
16508, it was established that these checks were made
payable to the CIR. Both were crossed checks. These checks
were apparently turned around by Ford's emploees, who
were acting on their own personal capacity.
Given these circumstances, the mere fact that the forgery
was committed by a drawer-payor's confidential employee
or agent, who by virtue of his position had unusual facilities
for perpertrating the fraud and imposing the forged paper
upon the bank, does notentitle the bank toshift the loss to
the drawer-payor, in the absence of some circumstance
raising estoppel against the drawer.21 This rule likewise
applies to the checks fraudulently negotiated or diverted by
the confidential employees who hold them in their
possession.
With respect to the negligence of PCIBank in the payment of
the three checks involved, separately, the trial courts found
variations between the negotiation of Citibank Check No.
SN-04867 and the misapplication of total proceeds of
Checks SN-10597 and 16508. Therefore, we have to
scrutinize, separately, PCIBank's share of negligence when
the syndicate achieved its ultimate agenda of stealing the
proceeds of these checks.
G.R. Nos. 121413 and 121479
Citibank Check No. SN-04867 was deposited at PCIBank
through its Ermita Branch. It was coursed through the
ordinary banking transaction, sent to Central Clearing with
the indorsement at the back "all prior indorsements and/or
lack of indorsements guaranteed," and was presented to
Citibank for payment. Thereafter PCIBank, instead of
remitting the proceeds to the CIR, prepared two of its
Manager's checks and enabled the syndicate to encash the
same.
On record, PCIBank failed to verify the authority of Mr.
Rivera to negotiate the checks. The neglect of PCIBank
employees to verify whether his letter requesting for the
replacement of the Citibank Check No. SN-04867 was duly
authorized, showed lack of care and prudence required in
the circumstances.

Furthermore, it was admitted that PCIBank is authorized to
collect the payment of taxpayers in behalf of the BIR. As an
agent of BIR, PCIBank is duty bound to consult its principal
regarding the unwarranted instructions given by the payor
or its agent. As aptly stated by the trial court, to wit:
"xxx. Since the questioned crossed check was deposited with
IBAA [now PCIBank], which claimed to be a
depository/collecting bank of BIR, it has the responsibility
to make sure that the check in question is deposited in
Payee's account only. xxx xxx xxx
As agent of the BIR (the payee of the check), defendant
IBAA should receive instructions only from its principal BIR
and not from any other person especially so when that
person is not known to the defendant. It is very imprudent
on the part of the defendant IBAA to just rely on the alleged
telephone call of the one Godofredo Rivera and in his
signature considering that the plaintiff is not a client of the
defendant IBAA."
It is a well-settled rule that the relationship between the
payee or holder of commercial paper and the bank to which
it is sent for collection is, in the absence of an argreement to
the contrary, that of principal and agent.22 A bank which
receives such paper for collection is the agent of the payee or
holder.23
Even considering arguendo, that the diversion of the
amount of a check payable to the collecting bank in behalf of
the designated payee may be allowed, still such diversion
must be properly authorized by the payor. Otherwise stated,
the diversion can be justified only by proof of authority from
the drawer, or that the drawer has clothed his agent with
apparent authority to receive the proceeds of such check.
Citibank further argues that PCI Bank's clearing stamp
appearing at the back of the questioned checks stating that
ALL PRIOR INDORSEMENTS AND/OR LACK OF
INDORSEMENTS GURANTEED should render PCIBank
liable because it made it pass through the clearing house
and therefore Citibank had no other option but to pay it.
Thus, Citibank had no other option but to pay it. Thus,
Citibank assets that the proximate cause of Ford's injury is
the gross negligence of PCIBank. Since the questione
dcrossed check was deposited with PCIBank, which claimed
to be a depository/collecting bank of the BIR, it had the
responsibility to make sure that the check in questions is
deposited in Payee's account only.
Indeed, the crossing of the check with the phrase "Payee's
Account Only," is a warning that the check should be
deposited only in the account of the CIR. Thus, it is the duty
of the collecting bank PCIBank to ascertain that the check
be deposited in payee's account only. Therefore, it is the
collecting bank (PCIBank) which is bound to scruninize the
check and to know its depositors before it could make the
clearing indorsement "all prior indorsements and/or lack of
indorsement guaranteed".
In Banco de Oro Savings and Mortgage Bank vs. Equitable
Banking Corporation,24 we ruled:
"Anent petitioner's liability on said instruments, this court is
in full accord with the ruling of the PCHC's Board of
Directors that:
'In presenting the checks for clearing and for payment, the
defendant made an express guarantee on the validity of "all
prior endorsements." Thus, stamped at the back of the
checks are the defedant's clear warranty: ALL PRIOR
ENDORSEMENTS AND/OR LACK OF ENDORSEMENTS
GUARANTEED. Without such warranty, plaintiff would not
have paid on the checks.'
No amount of legal jargon can reverse the clear meaning of
defendant's warranty. As the warranty has proven to be false
and inaccurate, the defendant is liable for any damage
arising out of the falsity of its representation."25
Lastly, banking business requires that the one who first
cashes and negotiates the check must take some percautions
to learn whether or not it is genuine. And if the one cashing
the check through indifference or othe circumstance assists
the forger in committing the fraud, he should not be
permitted to retain the proceeds of the check from the
drawee whose sole fault was that it did not discover the
forgery or the defect in the title of the person negotiating the
instrument before paying the check. For this reason, a bank
which cashes a check drawn upon another bank, without
requiring proof as to the identity of persons presenting it, or
making inquiries with regard to them, cannot hold the
proceeds against the drawee when the proceeds of the
checks were afterwards diverted to the hands of a third
party. In such cases the drawee bank has a right to believe
that the cashing bank (or the collecting bank) had, by the
usual proper investigation, satisfied itself of the authenticity
of the negotiation of the checks. Thus, one who encashed a
check which had been forged or diverted and in turn
received payment thereon from the drawee, is guilty of
7
negligence which proximately contributed to the success of
the fraud practiced on the drawee bank. The latter may
recover from the holder the money paid on the check.26
Having established that the collecting bank's negligence is
the proximate cause of the loss, we conclude that PCIBank is
liable in the amount corresponding to the proceeds of
Citibank Check No. SN-04867.
G.R. No. 128604
The trial court and the Court of Appeals found that PCIBank
had no official act in the ordinary course of business that
would attribute to it the case of the embezzlement of
Citibank Check Numbers SN-10597 and 16508, because
PCIBank did not actually receive nor hold the two Ford
checks at all. The trial court held, thus:
"Neither is there any proof that defendant PCIBank
contributed any official or conscious participation in the
process of the embezzlement. This Court is convinced that
the switching operation (involving the checks while in
transit for "clearing") were the clandestine or hidden
actuations performed by the members of the syndicate in
their own personl, covert and private capacity and done
without the knowledge of the defendant PCIBank…"27
In this case, there was no evidence presented confirming the
conscious particiapation of PCIBank in the embezzlement.
As a general rule, however, a banking corporation is liable
for the wrongful or tortuous acts and declarations of its
officers or agents within the course and scope of their
employment.28 A bank will be held liable for the negligence
of its officers or agents when acting within the course and
scope of their employment. It may be liable for the tortuous
acts of its officers even as regards that species of tort of
which malice is an essential element. In this case, we find a
situation where the PCIBank appears also to be the victim of
the scheme hatched by a syndicate in which its own
management employees had particiapted.
The pro-manager of San Andres Branch of PCIBank,
Remberto Castro, received Citibank Check Numbers SN-
10597 and 16508. He passed the checks to a co-conspirator,
an Assistant Manager of PCIBank's Meralco Branch, who
helped Castro open a Checking account of a fictitious person
named "Reynaldo Reyes." Castro deposited a worthless
Bank of America Check in exactly the same amount of Ford
checks. The syndicate tampered with the checks and
succeeded in replacing the worthless checks and the

eventual encashment of Citibank Check Nos. SN 10597 and
16508. The PCIBank Ptro-manager, Castro, and his co-
conspirator Assistant Manager apparently performed their
activities using facilities in their official capacity or authority
but for their personal and private gain or benefit.
A bank holding out its officers and agents as worthy of
confidence will not be permitted to profit by the frauds
these officers or agents were enabled to perpetrate in the
apparent course of their employment; nor will t be
permitted to shirk its responsibility for such frauds, even
though no benefit may accrue to the bank therefrom. For
the general rule is that a bank is liable for the fraudulent
acts or representations of an officer or agent acting within
the course and apparent scope of his employment or
authority.29 And if an officer or employee of a bank, in his
official capacity, receives money to satisfy an evidence of
indebetedness lodged with his bank for collection, the bank
is liable for his misappropriation of such sum.30
Moreover, as correctly pointed out by Ford, Section 531 of
Central Bank Circular No. 580, Series of 1977 provides that
any theft affecting items in transit for clearing, shall be for
the account of sending bank, which in this case is PCIBank.
But in this case, responsibility for negligence does not lie on
PCIBank's shoulders alone.
The evidence on record shows that Citibank as drawee bank
was likewise negligent in the performance of its duties.
Citibank failed to establish that its payment of Ford's checjs
were made in due course and legally in order. In its defense,
Citibank claims the genuineness and due execution of said
checks, considering that Citibank (1) has no knowledge of
any informity in the issuance of the checks in question (2)
coupled by the fact that said checks were sufficiently funded
and (3) the endorsement of the Payee or lack thereof was
guaranteed by PCI Bank (formerly IBAA), thus, it has the
obligation to honor and pay the same.
For its part, Ford contends that Citibank as the drawee bank
owes to Ford an absolute and contractual duty to pay the
proceeds of the subject check only to the payee thereof, the
CIR. Citing Section 6232 of the Negotiable Instruments Law,
Ford argues that by accepting the instrument, the acceptro
which is Citibank engages that it will pay according to the
tenor of its acceptance, and that it will pay only to the payee,
(the CIR), considering the fact that here the check was
crossed with annotation "Payees Account Only."
As ruled by the Court of Appeals, Citibank must likewise
answer for the damages incurred by Ford on Citibank
Checks Numbers SN 10597 and 16508, because of the
contractual relationship existing between the two. Citibank,
as the drawee bank breached its contractual obligation with
Ford and such degree of culpability contributed to the
damage caused to the latter. On this score, we agree with the
respondent court's ruling.
Citibank should have scrutinized Citibank Check Numbers
SN 10597 and 16508 before paying the amount of the
proceeds thereof to the collecting bank of the BIR. One
thing is clear from the record: the clearing stamps at the
back of Citibank Check Nos. SN 10597 and 16508 do not
bear any initials. Citibank failed to notice and verify the
absence of the clearing stamps. Had this been duly
examined, the switching of the worthless checks to Citibank
Check Nos. 10597 and 16508 would have been discovered in
time. For this reason, Citibank had indeed failed to perform
what was incumbent upon it, which is to ensure that the
amount of the checks should be paid only to its designated
payee. The fact that the drawee bank did not discover the
irregularity seasonably, in our view, consitutes negligence in
carrying out the bank's duty to its depositors. The point is
that as a business affected with public interest and because
of the nature of its functions, the bank is under obligation to
treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their
relationship.33
Thus, invoking the doctrine of comparative negligence, we
are of the view that both PCIBank and Citibank failed in
their respective obligations and both were negligent in the
selection and supervision of their employees resulting in the
encashment of Citibank Check Nos. SN 10597 AND 16508.
Thus, we are constrained to hold them equally liable for the
loss of the proceeds of said checks issued by Ford in favor of
the CIR.
Time and again, we have stressed that banking business is
so impressed with public interest where the trust and
confidence of the public in general is of paramount
umportance such that the appropriate standard of diligence
must be very high, if not the highest, degree of diligence.34 A
bank's liability as obligor is not merely vicarious but
primary, wherein the defense of exercise of due diligence in
the selection and supervision of its employees is of no
moment.35
Banks handle daily transactions involving millions of
pesos.36 By the very nature of their work the degree of
8
responsibility, care and trustworthiness expected of their
employees and officials is far greater than those of ordinary
clerks and employees.37 Banks are expected to exercise the
highest degree of diligence in the selection and supervision
of their employees.38
On the issue of prescription, PCIBank claims that the action
of Ford had prescribed because of its inability to seek
judicial relief seasonably, considering that the alleged
negligent act took place prior to December 19, 1977 but the
relief was sought only in 1983, or seven years thereafter.
The statute of limitations begins to run when the bank gives
the depositor notice of the payment, which is ordinarily
when the check is returned to the alleged drawer as a
voucher with a statement of his account,39 and an action
upon a check is ordinarily governed by the statutory period
applicable to instruments in writing.40
Our laws on the matter provide that the action upon a
written contract must be brought within ten year from the
time the right of action accrues.41 hence, the reckoning time
for the prescriptive period begins when the instrument was
issued and the corresponding check was returned by the
bank to its depositor (normally a month thereafter).
Applying the same rule, the cause of action for the recovery
of the proceeds of Citibank Check No. SN 04867 would
normally be a month after December 19, 1977, when
Citibank paid the face value of the check in the amount of
P4,746,114.41. Since the original complaint for the cause of
action was filed on January 20, 1984, barely six years had
lapsed. Thus, we conclude that Ford's cause of action to
recover the amount of Citibank Check No. SN 04867 was
seasonably filed within the period provided by law.
Finally, we also find thet Ford is not completely blameless in
its failure to detect the fraud. Failure on the part of the
depositor to examine its passbook, statements of account,
and cancelled checks and to give notice within a reasonable
time (or as required by statute) of any discrepancy which it
may in the exercise of due care and diligence find therein,
serves to mitigate the banks' liability by reducing the award
of interest from twelve percent (12%) to six percent (6%) per
annum. As provided in Article 1172 of the Civil Code of the
Philippines, respondibility arising from negligence in the
performance of every kind of obligation is also demandable,
but such liability may be regulated by the courts, according
to the circumstances. In quasi-delicts, the contributory
negligence of the plaintiff shall reduce the damages that he
may recover.42

WHEREFORE, the assailed Decision and Resolution of
the Court of Appeals in CA-G.R. CV No. 25017
are AFFIRMED. PCIBank, know formerly as Insular Bank
of Asia and America, id declared solely responsible for the
loss of the proceeds of Citibank Check No SN 04867 in the
amount P4,746,114.41, which shall be paid together with six
percent (6%) interest thereon to Ford Philippines Inc. from
the date when the original complaint was filed until said
amount is fully paid.
However, the Decision and Resolution of the Court of
Appeals in CA-G.R. No. 28430 are MODIFIED as follows:
PCIBank and Citibank are adjudged liable for and must
share the loss, (concerning the proceeds of Citibank Check
Numbers SN 10597 and 16508 totalling P12,163,298.10) on
a fifty-fifty ratio, and each bank is ORDERED to pay Ford
Philippines Inc. P6,081,649.05, with six percent (6%)
interest thereon, from the date the complaint was filed until
full payment of said amount.1âwphi1.nêt
Costs against Philippine Commercial International Bank
and Citibank N.A.
SO ORDERED.
FIRST DIVISION
G.R. No. 141716 July 4, 2002
SAN MIGUEL CORPORATION, petitioner,
vs.
HEIRS OF SABINIANO INGUITO, and JULIUS
OUANO, respondents.
G.R. No. 142025 July 4, 2002
JULIUS C. OUANO, petitioner,
vs.
THE COURT OF APPEALS, SAN MIGUEL CORPORATION and THE
HEIRS OF SABINIANO INGIUTO, FELIPE PUSA, ABUNDIO
GALON, ISIDRO CELETARIA, GILBERT GONZAGA, HENRY
CABIGAS, RAFAEL MACAIRAN, ROGELIO MORENO, PETER
ABAYON, SIMEON ASENTISTA, NORMAN LOON, EUGENIO
GESTOPA, CHRISTOPHER SAVELLON, GEORGE BASILGO,
RAMIL PABAYO, FLAVIANO WABENA, NESTOR
GESTOPA, respondents.
YNARES-SANTIAGO, J.:
San Miguel Corporation entered into a Time Charter Party
Agreement with Julius Ouano, doing business under the
name and style J. Ouano Marine Services. Under the terms
of the agreement, SMC chartered the M/V Doña Roberta
owned by Julius Ouano for a period of two years, from June
1, 1989 to May 31, 1991, for the purpose of transporting
SMC’s beverage products from its Mandaue City plant to
various points in Visayas and Mindanao. Pertinent portions
of the Time Charter Party Agreement state:
1. OWNER [i.e., Ouano] warrants ownership, title and
interest over the vessel DOÑA ROBERTA and represents
that on the date the vessel is placed at CHARTERER’s San
Miguel Corporation] disposal the following shall be the
accurate or approximate description of the particulars and
capacities of the vessel and her equipment:
xxx xxx xxx. 2. That for and in consideration of
the premises hereinafter stipulated, the OWNER hereby
lets, demises and the CHARTERER hereby hires the use and
service of the aforementioned vessel;xxx xxx xxx.
4. OWNER warrants that the vessel is seaworthy and in
proper, useful and operational condition and in the event
that CHARTERER finds any defect in the vessel with
regards to its working order, condition and function,
CHARTERER shall immediately notify OWNER of this fact;
xxx xxx xxx. 9. There shall be no employer-
employee relations between the OWNER and/or its vessel’s
crew on one hand and the CHARTERER on the other. The
crew of the vessel shall continue to be under the employ,
control and supervision of the OWNER. Consequently,
damage or loss that may be attributable to the crew,
including loss of the vessel used shall continue to be the
responsibility of, and shall be borne, by the OWNER; the
OWNER further covenants to hold the CHARTERER free
from all claims and liabilities arising out of the acts of the
crew and the condition of the vessel;
10. The OWNER shall undertake to pay all compensation of
all the vessel’s crew, including the benefits, premia and
protection in accordance with the provisions of the New
Labor Code and other applicable laws and decrees and the
rules and regulations promulgated by competent authorities
as well as all of the SSS premium. Thus, it is understood that
the crew of he vessel shall and always remain the employees
of the OWNER;
11. The OWNER shall be responsible to and shall indemnify
the CHARTERER for damages and losses arising from the
incompetence and/or negligence of, and/or the failure to
observe the required extra-ordinary diligence by the crew. It
shall be automatically liable to the CHARTERER for
shortlanded shipment and wrong levels, the value of which
shall be withheld from the OWNER’s collectibles with the
CHARTERER. However, in the case of wrong levels,
CHARTERER shall immediately reimburse OWNER after
the former’s laboratory shall be able to determine that the
bottles were never opened after it left the Plant;
xxx xxx xxx.1
9
On November 11, 1990, during the term of the charter, SMC
issued sailing orders to the Master of the MN Doña Roberta,
Captain Sabiniano Inguito, instructing him as follows:
1. Sail for Opol, Cagayan 0500H Nov. 12, 1990, or as soon as
loading of FGS is completed, with load:
SEE BILL OF LADING
2. You are expected to arrive Opol 0900H Nov. 13, 1990.
3. You are expected to depart Opol 0900H Nov. 14, 1990, or
as soon as loading of empties is completed, back to
Mandaue.
4. You are expected to arrive Mandaue 1300H Nov. 15,
1990.
5. In case you need cash advance, send your request thru
radio addressed to us for needed authority.
6. Maintain communications and keep us posted of your
developments.
7. Observe weather condition, exercise utmost
precautionary measures.
BON VOYAGE AND GOOD LUCK.2
In accordance with the sailing orders, Captain Inguito
obtained the necessary sailing clearance from the Philippine
Coast Guard.3 Loading of the cargo on the M/V Doña
Roberta was completed at 8:30 p.m. of November 11, 1990.
However, the vessel did not leave Mandaue City until 6:00
a.m. of the following day, November 12, 1990.
Meanwhile, at 4:00 a.m. of November 12, 1990, typhoon
Ruping was spotted 570 kilometers east-southeast of
Borongan, Samar, moving west-northwest at 22 kilometers
per hour in the general direction of Eastern Visayas. The
typhoon had maximum sustained winds of 240 kilometers
per hour near the center with gustiness of up to 280
kilometers per hour.4
At 7:00 a.m., November 12, 1990, one hour after the M/V
Doña Roberta departed from Mandaue City and while it was
abeam Cawit Island off Cebu, SMC Radio Operator Rogelio
P. Moreno contacted Captain Inguito through the radio and
advised him to take shelter. Captain Inguito replied that
they will proceed since the typhoon was far away from them,
and that the winds were in their favor.5
At 2:00 p.m., while the vessel was two kilometers abeam
Boljoon Point, Moreno again communicated with Captain
Inguito and advised him to take shelter. The captain
responded that they can manage.6 Hearing this, Moreno
immediately tried to get in touch with Rico Ouano to tell
him that Captain Inguito did not heed their advice.
However, Rico Ouano was out of his office, so Moreno left
the message with the secretary.7

Moreno again contacted Captain Inguito at 4:00 p.m. of
November 12, 1990. By then the vessel was already 9.5 miles
southeast of Balicasag Island heading towards Sulauan
Point. The sky was cloudy with southwesterly winds and the
sea was choppy.8 Moreno reiterated the advice and pointed
out that it will be difficult to take shelter after passing
Balicasag Island because they were approaching an open
sea. Still, the captain refused to heed his advice.9
At 8:00 p.m., the vessel was 38 miles southeast of Balicasag
Island. West-southwest winds were prevailing. At 10:00
p.m., the M/V Doña Roberta was 25 miles approaching
Sulauan Point.10 Moments later, power went out in
Moreno’s office and resumed at 11:40 p.m. He immediately
made a series of calls to the M/V Doña Roberta but he failed
to get in touch with anyone in the vessel.11
At 1:15 a.m., November 13, 1990, Captain Inguito called
Moreno over the radio and requested him to contact Rico
Ouano, son of Julius Ouano, because they needed a
helicopter to rescue them. The vessel was about 20 miles
west of Sulauan Point.12
Upon being told by SMC’s radio operator, Rico Ouano
turned on his radio and read the distress signal from
Captain Ingiuto. When he talked to the captain, the latter
requested for a helicopter to rescue them.13 Rico Ouano
talked to the Chief Engineer who informed him that they
can no longer stop the water from coming into the vessel
because the crew members were feeling dizzy from the
petroleum fumes.14
At 2:30 a.m. of November 13, 1990, the M/V Doña Roberta
sank. Out of the 25 officers and crew on board the vessel,
only five survived, namely, Fernando Bucod, Rafael
Macairan, Chenito Sugabo, Ramil Pabayo and Gilbert
Gonzaga.15
On November 24, 1990, shipowner Julius Ouano, in lieu of
the captain who perished in the sea tragedy, filed a Marine
Protest.16
The heirs of the deceased captain and crew, as well as the
survivors,17 of the ill-fated M/V Doña Roberta filed a
complaint for tort against San Miguel Corporation and
Julius Ouano, docketed as Civil Case No. 2472-L of the
Regional Trial Court of Lapu-Lapu City, Branch 27.18
Julius Ouano filed an answer with cross-claim,19 alleging
that the proximate cause of the loss of the vessel and its
10
officers and crew was the fault and negligence of SMC, 2. Pusa, Felipe P 1,200,000 (50% x P2,400,000)
which had complete control and disposal of the vessel as
3. Galon, Abundio P 825,000 (50% x P 1,650,000)
charterer and which issued the sailing order for its
departure despite being forewarned of the impending 4. Celetaria, Isidro P 600,000 (50% x P1,200,000)
typhoon. Thus, he prayed that SMC indemnify him for the 5. Cabigas, Henry P 930,000 (50% x P 1,860,000)
cost of the vessel and the unrealized rentals and earnings 6. Abayon, Pedro P 660,000 (50% x P 1,320,000)
thereof.
7. Asentista, Simeon P 500,000 (50% x P1,000,000)
8. Loon, Norman P 550,000 (50% x P 1,100,000)
In its answer to the complaint19 and answer to the cross-
claim,20 SMC countered that it was Ouano who had the 9. Presbitero, Leonardo P 460,000 (50% x P 920,000)
control, supervision and responsibilities over the navigation 10. Suscano, Renato P 460,000 (50% x P 920,000)
of the vessel. This notwithstanding, and despite his 11. Du, Antonio P 480,000 (50% x P 960,000)
knowledge of the incoming typhoon, Ouano never bothered
to initiate contact with his vessel. Contrary to his allegation, 12. Basilgo, George P 120,000 (Apprentice)
SMC argued that the proximate cause of the sinking was 13. Dayondon, Isagani P 120,000 (Ditto)
Ouano’s breach of his obligation to provide SMC with a --------------------------------------------
seaworthy vessel duly manned by competent crew members.
SMC interposed counterclaims against Ouano for the value Total: P8,645,000
vvvvvvvvvvvvvv
of the cargo lost in the sea tragedy.
After trial, the court a quo rendered judgment finding that C. P300,000.00 for moral damages and P200,000.00 for
the proximate cause of the loss of the M/V Doña Roberta exemplary damages for the heirs of each of the deceased
was attributable to SMC. Thus, it disposed of the case as crew members of the M/V Doña Roberta named in the
follows: Amended Complaint including survivor Gilbert Gonzaga;
WHEREFORE, PREMISES CONSIDERED, judgment is D. To pay plaintiffs’ counsel attorney’s fees in the sum of
hereby rendered: P500,000.00;
1. Declaring defendant San Miguel Corporation and its acts 2. Under the cross-claim of defendant, Ouano, San Miguel
or omissions as having produced the proximate cause which Corporation is further ordered and sentenced to pay
resulted in the death of the crew members of MN Doña defendant cross-claimant Engr. Julius C. Ouano the total
Roberta at past midnight of November 12, 1990 during the sum of P32,893,300.00 plus 12% per annum from the filing
height of super typhoon "Ruping" and as such said of his crossclaim, broken down as follows:
defendant is hereby ordered and sentenced to pay to the
heirs of the deceased crew members the following sum[s] 1) P9.8 million for the value of the total loss of the vessel
plus 12% per annum from the filing of the Complaint: M/V Doña Roberta;
A. For loss of life. . . . . . . P50,000.00 each of the 2) P1,833,300.00 for unrealized rental earnings
deceased crew members, namely: Sabiniano Inguito Felipe (P3,666,600.00 less 50% for operating expenses and taxes)
Pusa, Abundio Galon, Isidro Celetaria, Henry Cabigas, from November 19, 1990 to May 31, 1991 as stipulated in the
Pedro Abayon, Simeon Asentista, Norman Loon, Leonardo Charter Party Agreement;
Presbitero, Renato Suscano, Antonio Du, George Basilgo,
Isagani Dayondon;
3) P21,000,000.00 for unrealized earnings of M/V Doña
Roberta based on the expected additional lifetime of the
B. For loss of earnings based on life expectancy vessel estimated at seven (7) years (42,000,000.00 less 50%
less 50% representing estimated living expenses except for for operating expenses and taxes);
the apprentices as they were presumed at the time of their
deaths to be dependent on their parents:
4) P250,000.00 for and as attorney’s fees and P 10,000.00
Name Total loss of earnings as expenses of litigation;
1. Sabiniano, Inguito (sic) P1,740,000 (50% x P3,480,000)

3. The counter-claims against plaintiffs and the cross-claim
of defendant San Miguel Corporation against defendant
Engr. Julius C. Ouano are hereby dismissed for lack of
merit.
With costs against defendant San Miguel Corporation.
SO ORDERED.22
Both SMC and Ouano appealed to the Court of Appeals,
docketed as CA-G.R. CV No. 48296. SMC argued that as
mere charterer, it did not have control of the vessel and that
the proximate cause of the loss of the vessel and its cargo
was the negligence of the ship captain. For his part, Ouano
complained of the reduced damages awarded to him by the
trial court.
On December 10, 1998, the Court of Appeals rendered the
decision subject of the instant petitions for review, to wit:
WHEREFORE, judgment is hereby rendered, modifying the
decision appealed from, declaring defendant-appellants San
Miguel Corporation and Julian C. Ouano jointly and
severally liable to plaintiffs-appellees, except to the heirs of
Capt. Sabiniano Inguito, for the following reduced amounts:
A. P50,000.00 death indemnity (loss of life) for each of
the deceased officers and crew of M/V Doña Roberta.
b. Loss of earning for each of the deceased officers and crew,
in the amount awarded by the trial court.
c. P100,000.00 moral damages and P50,000.00 exemplary
damages for each deceased officer and crew members,
including Gilbert Gonzaga.
d. P300,000,00 attorney’s fees to plaintiffs-appellees.
e. The counter-claims of defendants-appellants against
plaintiffs-appellees are dismissed.
f. The cross-claims of defendants-appellants SMC and Julius
Ouano against each other are likewise dismissed.
g. Costs against defendants-appellants.
SO ORDERED.23
SMC and Ouano filed separate motions for reconsideration,
which were denied by the Court of Appeals for lack of
merit.24
Petitioner SMC, in G.R. No. 141716, raises the following
arguments:
I. SMC COULD NOT BE A TORTFEASOR CONSIDERING
THE UNDISPUTED FACT THAT:
A. SMC HAS NO LEGAL OR CONTRACTUAL DUTY
TO INFORM OUANO ABOUT THE SITUATION OF THE
VESSEL.
B. EVEN WITHOUT SUCH DUTY, SMC NEVERTHELESS
EXERCISED THE NECESSARY DEGREE OF PRUDENCE
BY INFORMING OUANO ABOUT INGUITO’S REFUSAL
TO TAKE SHELTER.
C. THE COURT OF APPEALS ITSELF FOUND THAT THE
PROXIMATE CAUSE OF THE LOSS OF THE VESSEL WAS
INGUITO’S FAILURE TO HEED SMC’S ADVICE TO TAKE
SHELTER, AND INGUITO WAS AN EMPLOYEE OF
OUANO AND NOT OF SMC.
II. UNDER THE CHARTER, OUANO WAS RESPONSIBLE
AND UNDERTOOK TO INDEMNIFY SMC FOR ALL
DAMAGES ARISING FROM THE NEGLIGENCE OF HIS
CREW, PARTICULARLY INGUITO.25
Meanwhile, petitioner Ouano, in G.R. No. 142025, anchors
his petition on the following assignment of errors:
First Error The Court of Appeals committed serious error of
law and/or grave abuse of discretion in not finding that the
Charter Party between SMC and Ouano is legally and in fact
a demise charter, an issue raised by petitioner from the very
start in the Trial Court
Second Error The Court of Appeals committed serious error
of law and/or grave abuse of discretion in not finding that
Capt. Inguito, master of the ill-fated M/V Doña Roberta,
was legally and in fact an agent/servant of SMC demise
charterer as correctly characterized by the Trial Court
Third Error The Court of Appeals committed serious error
of law and/or grave abuse of discretion in completely
disregarding or suppressing the findings of fact of the Trial
Court on the issues of possession and control of M/V Doña
Roberta by SMC and its actions relating thereto as demise
charterer/owner pro hac vice which led to the tragedy and
in not declaring that said actions of SMC constituted the
proximate cause of the sinking and loss of the vessel and the
death of most of its crew members
11
Fourth Error The Court of Appeals committed serious error
of law and/or grave abuse of discretion in finding Ouano at
fault in the sinking of M/V Doña Roberta against the
evidence on record which is largely undisputed
Fifth Error The Court of Appeals committed serious error of
law and/or grave abuse of discretion insofar as it failed to
find and declare respondent SMC’s tort or negligence as the
proximate cause which resulted in the sinking and total loss
of M/V Doña Roberta as well as the death of its officers and
crew members and correspondingly in not awarding to
petitioner Ouano the sums of money as awarded by the Trial
Court in the dispositive part of its decision dated 10
December 1998.
Sixth Error In any event, the Court of Appeals committed
serious error of law and/or grave abuse of discretion in not
declaring and holding petitioner Ouano not liable for the
claims of private respondents heirs of Sabiniano Inguito, et
al. and SMC under the well-established principle in
Maritime Law that the owner’s liability sinks with the
vessel.26
The two petitions were consolidated.
In deciding the cases at bar, the Court of Appeals correctly
resolved the issues with an initial discussion of the
definition and kinds of charter parties. Preliminarily, a
charter party is a contract by virtue of which the owner or
the agent of a vessel binds himself to transport merchandise
or persons for a fixed price. It has also been defined as a
contract by virtue of which the owner or the agent of the
vessel leases for a certain price the whole or a portion of the
vessel for the transportation of goods or persons from one
port to another.27
A charter party may either be a (1) bareboat or demise
charter or (2) contract of affreightment. Under a demise or
bareboat charter, the charterer mans the vessel with his own
people and becomes, in effect, the owner of the ship for the
voyage or service stipulated, subject to liability for damages
caused by negligence.28
In a contract of affreightment, on the other hand, the owner
of the vessel leases part or all of its space to haul goods for
others. It is a contract for special service to be rendered by
the owner of the vessel. Under such contract the ship owner
retains the possession, command and navigation of the ship,
the charterer or freighter merely having use of the space in
the vessel in return for his payment of the charter

hire.29 Otherwise put, a contract of affreightment is one by
which the owner of a ship or other vessel lets the whole or
part of her to a merchant or other person for the conveyance
of goods, on a particular voyage, in consideration of the
payment of freight.
A contract of affreightment may be either time charter,
wherein the leased vessel is leased to the charterer for a
fixed period of time, or voyage charter, wherein the ship is
leased for a single voyage. In both cases, the charterer
provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive
voyage, the ship owner to supply the ship’s store, pay for the
wages of the master of the crew, and defray the expenses for
the maintenance of the ship.
If the charter is a contract of affreightment, which leaves the
general owner in possession of the ship as owner for the
voyage, the rights and the responsibilities of ownership rest
on the owner. The charterer is free from liability to third
persons in respect of the ship.30
We concur with the findings of the Court of Appeals that the
charter party in these cases was a contract of affreightment,
contrary to petitioner Ouano’s protestation that it was a
demise charter, as shown by the following stipulations in the
Time Charter Party Agreement:
9. There shall be no employer-employee relations between
the OWNER and/or its vessel’s crew on one hand and the
CHARTERER on the other. The crew of the vessel shall
continue to be under the employ, control and supervision of
the OWNER. Consequently, damage or loss that may be
attributable to the crew, including loss of the vessel used
shall continue to be the responsibility of, and shall be borne,
by the OWNER; the OWNER further covenants to hold the
CHARTERER free from all claims and liabilities arising out
of the acts of the crew and the condition of the vessel;
10. The OWNER shall undertake to pay all compensation of
all the vessel’s crew, including the benefits, premia and
protection in accordance with the provisions of the New
Labor Code and other applicable laws and decrees and the
rules and regulations promulgated by competent authorities
as well as all of the SSS premium. Thus, it is understood that
the crew of he vessel shall and always remain the employees
of the OWNER;
11. The OWNER shall be responsible to and shall indemnify
the CHARTERER for damages and losses arising from the
incompetence and/or, negligence of, and/or the failure to
observe the required extraordinary diligence by the crew. It
shall be automatically liable to the CHARTERER for
shortlanded shipment and wrong levels, the value of which
shall be withheld from the OWNER’s collectibles with the
CHARTERER. However, in the case of wrong levels,
CHARTERER shall immediately reimburse OWNER after
the former’s laboratory shall be able to determine that the
bottles were never opened after it left the Plant;”
It appearing that Ouano was the employer of the captain
and crew of the M/V Doña Roberta during the term of the
charter, he therefore had command and control over the
vessel. His son, Rico Ouano, even testified that during the
period that the vessel was under charter to SMC, the
Captain thereof had control of the navigation of all
voyages.31
Under the foregoing definitions, as well as the clear terms of
the Charter Party Agreement between the parties, the
charterer, SMC, should be free from liability for any loss or
damage sustained during the voyage,32 unless it be shown
that the same was due to its fault or negligence.
The evidence does not show that SMC or its employees were
amiss in their duties. The facts indubitably establish that
SMC’s Radio Operator, Rogelio P. Moreno, who was tasked
to monitor every shipment of its cargo, contacted Captain
Inguito as early as 7:00 a.m., one hour after the M/V Doña
Roberta departed from Mandaue, and advised him to take
shelter from typhoon Ruping. This advice was reiterated at
2:00 p.m. At that point, Moreno thought of calling Ouano’s
son, Rico, but failed to find him. At 4:00 p.m., Moreno again
advised Captain Inguito to take shelter and stressed the
danger of venturing into the open sea. The Captain insisted
that he can handle the situation.
That evening, Moreno tried in vain to contact the captain.
Later at 1:15 a.m., Captain Inguito himself radioed a distress
signal and asked that the same be relayed to Rico Ouano.
In contrast to the care exercised by Moreno, Rico Ouano
tried to communicate with the captain only after receiving
the S.O.S. message. Neither Ouano nor his son was available
during the entire time that the vessel set out and
encountered foul weather. Considering that the charter was
a contract of affreightment, the shipowner had the clear
duty to ensure the safe carriage and arrival of goods
transported on board its vessels. More specifically, Ouano
12
expressly warranted in the Time Charter Party that his
vessel was seaworthy.
For a vessel to be seaworthy, it must be adequately equipped
for the voyage and manned with a sufficient number of
competent officers and crew.33 Seaworthiness is defined as
the sufficiency of the vessel in materials, construction,
equipment, officers, men, and outfit, for the trade or service
in which it is employed.34 It includes the fitness of a ship for
a particular voyage with reference to its physical and
mechanical condition, the extent of its fuel and provisions
supply, the quality of its officers and crew, and its
adaptability for the time of voyage proposed.35
In the assailed decision, the Court of Appeals found that the
proximate cause of the sinking of the vessel was the
negligence of Captain Sabiniano Inguito, thus:
It appears that the proximate cause of the sinking of the
vessel was the gross failure of the captain of the vessel to
observe due care and to heed SMC’s advices to take shelter.
Gilbert Gonsaga, Chief Engineer of Doña Roberta, testified
that the ship sank at 2:30 in the early morning of November
13th. On the other hand, from the time the vessel left the
port of Mandaue at six o’clock in the morning, Exh "15
SMC", Exh "16 SMC", Exh "17 SMC" and Exh "18 SMC"
would show that Captain Sabiniano Inguito was able to
contact the radio operator of SMC. He was fully apprised of
typhoon "Ruping" and its strength. Due diligence dictates
that at any time before the vessel was in distress, he should
have taken shelter in order to safeguard the vessel and its
crew. Gonsaga testified that at 7:00 a.m. of November 12,
1990, he was able to talk to the captain and inquired from
him what the message was of the radio operator of SMC.
The captain answered that they would take shelter in
Tagbilaran if the wind would grow stronger. But Gonsaga
was surprised when they did not take shelter and, instead,
proceeded with the voyage.
Gonsaga further testified that at 7:00 in the evening of
November 12, 1990, he went up to the office of the captain
when the wind was getting stronger and asked him, "What is
this captain, the wind is already very strong and the waves
are very big, what is the message of SMC?" The captain
plotted the position of the typhoon and said that the
typhoon is still very far per the data supplied by SMC.
It is very clear that Captain Sabiniano Inguito had sufficient
time within which to secure his men and the vessel. But he
waited until the vessel was already in distress at 1:15 in the

early morning of November 13m, 1990 to seek help in saving
his men and the vessel. In any event, Capt. Inguito had full
control and responsibility, whether to follow a sailing order
or to take shelter when already at sea. In fact, there was an
incident when a sailing order was issued by SMC to Inguito
but he decided not to proceed with the voyage because of a
tropical storm.36
The foregoing factual conclusions are binding on us. Settled
is the rule that findings of fact of the Court of Appeals are
conclusive and are not reviewable by this Court,37 unless the
case falls under any of the recognized exceptions, such as:
(1) when the conclusion is a finding grounded entirely on
speculation, surmises and conjectures; (2) when the
inference made is manifestly mistaken, absurd or
impossible; (3) where there is a grave abuse of discretion;
(4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when
the Court of Appeals, in making its findings, went beyond
the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (7) when the
findings are contrary to those of the trial court; (8) when the
findings of fact are conclusions without citation of specific
evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioners’ main and
reply briefs are not disputed by the respondents; and (10)
when the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and
contradicted by the evidence on record.38 None of these
exceptions obtain in the case at bar.
We likewise agree with the Court of Appeals that Ouano is
vicariously liable for the negligent acts of his employee,
Captain Inguito. Under Articles 2176 and 2180 of the Civil
Code, owners and managers are responsible for damages
caused by the negligence of a servant or an employee, the
master or employer is presumed to be negligent either in the
selection or in the supervision of that employee. This
presumption may be overcome only by satisfactorily
showing that the employer exercised the care and the
diligence of a good father of a family in the selection and the
supervision of its employee.39
Ouano miserably failed to overcome the presumption of his
negligence. He failed to present proof that he exercised the
due diligence of a bonus paterfamilias in the selection and
supervision of the captain of the M/V Doña Roberta. Hence,
he is vicariously liable for the loss of lives and property
occasioned by the lack of care and negligence of his
employee.
However, we cannot sustain the appellate court’s finding
that SMC was likewise liable for the losses. The contention
that it was the issuance of the sailing order by SMC which
was the proximate cause of the sinking is untenable. The
fact that there was an approaching typhoon is of no
moment. It appears that on one previous occasion, SMC
issued a sailing order to the captain of the M/V Doña
Roberta, but the vessel cancelled its voyage due to
typhoon.40Likewise, it appears from the records that SMC
issued the sailing order on November 11, 1990, before
typhoon "Ruping" was first spotted at 4:00 a.m. of
November 12, 1990.41
Consequently, Ouano should answer for the loss of lives and
damages suffered by the heirs of the officers and crew
members who perished on board the M/V Doña Roberta,
except Captain Sabiniano Inguito. The award of damages
granted by the Court of Appeals is affirmed only against
Ouano, who should also indemnify SMC for the cost of the
lost cargo, in the total amount of P10,278,542.40.42
WHEREFORE, in view of the foregoing, the decision of
the Court of Appeals in CA-G.R. CV No. 48296
is MODIFIED as follows: Julius C. Ouano is ordered to pay
each of the deceased officers and crew of the M/V Doña
Roberta, except Captain Sabinano Inguito, death indemnity
in the amount of P50,000.00 and damages for loss of
earnings in the amounts awarded by the trial court. Further,
Julius C. Ouano is ordered to pay each deceased officer and
crew members, except Captain Sabiniano Inguito, including
Gilbert Gonzaga, P100,000.00 as moral damages,
P50,000.00 as exemplary damages and P300,000.00 as
attorney’s fees. Finally, Julius C. Ouano is ordered to pay
San Miguel Corporation the sums of P10,278,542.40 as
actual damages.
SO ORDERED.
FIRST DIVISION
G.R. No. 170071 March 9, 2011
HEIRS OF JOSE MARCIAL K. OCHOA namely:
RUBY B. OCHOA, MICAELA B. OCHOA and JOMAR
B. OCHOA, Petitioners,
vs. G & S TRANSPORT CORPORATION, Respondent.
G.R. No. 170125
G & S TRANSPORT CORPORATION, Petitioner,
vs.
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA,
MICAELA B. OCHOA and JOMAR B. OCHOA, Respondents.
DECISION
DEL CASTILLO, J.:
An accident which claimed the life of a passenger is the root
of these two petitions - one brought before us by the
common carrier and the other by the heirs of the deceased.
13
These consolidated Petitions for Review on Certiorari assail
the Court of Appeals’ (CA) Decision1 dated June 29, 2005 in
CA-G.R. CV No. 75602 which affirmed with modification
the December 21, 2001 Decision and March 5, 2002 Order
of the trial court. Likewise assailed is the Resolution2 dated
October 12, 2005 denying the parties’ respective Motions for
Reconsideration thereto.
Factual Antecedents
Jose Marcial K. Ochoa (Jose Marcial) died on the night of
March 10, 1995 while on board an Avis taxicab owned and
operated by G & S Transport Corporation (G & S), a
common carrier. As narrated by the trial court, the
circumstances attending Jose Marcial’s death are as follows:
It appears that sometime in the evening of March 10, 1995,
at the Manila Domestic Airport, the late Jose Marcial K.
Ochoa boarded and rode a taxicab with Plate No. PKR-534,
a passenger vehicle for hire owned and operated by
defendant corporation under the business name "Avis
Coupon Taxi" (Avis) and driven by its employee and
authorized driver Bibiano Padilla, Jr. on his way home to
Teacher’s Village, Diliman, Quezon City.
At about 11:00 p.m., the taxicab was cruising along Epifanio
delos Santos Avenue [EDSA], in front of Camp Aguinaldo in
Quezon City at high speed. While going up the Boni Serrano
(Santolan) fly-over, it overtook another cab driven by Pablo
Clave and tried to pass another vehicle, a ten-wheeler cargo
truck. Because of the narrow space between the left side
railing of the fly-over and the ten-wheeler truck, the Avis
cab was unable to pass and because of its speed, its driver
(Padilla) was unable to control it. To avoid colliding with the
truck, Padilla turned the wheel to the left causing his taxicab
to ram the railing throwing itself off the fly-over and fell on
the middle surface of EDSA below. The forceful drop of the
vehicle on the floor of the road broke and split it into two
parts. Both driver Padilla and passenger Jose Marcial K.
Ochoa were injured and rushed to the hospital. At the East
Avenue Medical Center, Ochoa was not as lucky as Padilla
who was alive. He was declared dead on arrival from the
accident. The death certificate issued by the Office of the
Civil Registrar of Quezon City cited the cause of his death as
vehicular accident.3
On May 13, 1999, Jose Marcial’s wife, Ruby Bueno Ochoa,
and his two minor children, Micaela B. Ochoa and Jomar B.
Ochoa (the heirs), through counsel, sent G & S a
letter4 demanding that the latter indemnify them for Jose
Marcial’s death, his loss of earning capacity, and funeral
expenses in the total amount of ₱15,000,000.00. As G & S

failed to heed the same, the heirs filed a Complaint5 for
Damages before the Regional Trial Court (RTC) of Pasig
City which was raffled to Branch 164 of said court.
The heirs alleged that G & S, as a common carrier, is under
legal obligation to observe and exercise extraordinary
diligence in transporting its passengers to their destination
safely and securely. However, G & S failed to observe and
exercise this extraordinary diligence because its employee
failed to transport Jose Marcial to his destination safely.
They averred that G & S is liable to them for having
breached the contract of common carriage. As an alternative
cause of action, they asserted that G & S is likewise liable for
damages based on quasi-delict pursuant to Article 21806 in
relation to Article 21767 of the Civil Code. The heirs thus
prayed for G & S to pay them actual damages, moral
damages, exemplary damages, and attorney’s fees and
expenses of litigation.
In its Answer With Compulsory Counterclaims,8 G & S
claimed that Jose Marcial boarded an Avis taxicab driven by
its employee, Bibiano Padilla (Padilla), at the Domestic
Airport to bring him to Teacher’s Village in Quezon City.
While passing the Santolan fly-over, however, the Avis
taxicab was bumped by an on-rushing delivery van at the
right portion causing the taxicab to veer to the left, ram
through the left side of the railings of the fly-over and fall to
the center of the island below. The taxicab was split into two
and Jose Marcial was thrown 10 meters away. G & S posited
that the proximate cause of Jose Marcial’s death is a
fortuitous event and/or the fault or negligence of the driver
of the delivery van that hit the taxicab. It likewise claimed
that it exercised the diligence required of a good father of a
family in the selection and supervision of its employees
including Padilla. By way of compulsory counterclaim, G &
S sought to recover from the heirs the amount of
₱300,000.00 as attorney’s fees and costs of suit.
Ruling of the Regional Trial Court
On December 27, 2001, the trial court rendered a
Decision9 finding the vehicular mishap not caused by a
fortuitous event but by the negligence of Padilla. It likewise
found the evidence adduced by G & S to show that it
exercised the diligence of a good father of a family in the
selection and supervision of its employees as insufficient.
Hence, the trial court declared G & S civilly liable to the
heirs. However, for lack of receipts or any proof of funeral
expenses and other actual damages, the trial court denied
the heirs’ claim for actual damages. It also denied them
moral and exemplary damages for lack of legal basis. The
dispositive portion of said Decision reads:
WHEREFORE, defendant is hereby adjudged guilty of
breach of contract of carriage and is ordered to pay plaintiffs
the following amounts:
1. ₱50,000.00 as civil indemnity for the death of deceased
Jose Marcial K. Ochoa;
2. ₱6,537,244.96 for the loss of earning capacity of the
deceased;
3. ₱100,00.00 for attorney’s fees;
4. And the cost of litigation.
SO ORDERED.10
G & S filed a Notice of Appeal11 while the heirs filed a
Motion for Partial Reconsideration.12 The heirs averred that
they are entitled to moral damages pursuant to Article
176413 in relation to Article 2206(3)14 of the Civil Code. They
also cited applicable jurisprudence providing that moral
damages are recoverable in a damage suit predicated upon a
breach of contract of carriage where the mishap results in
the death of the passenger. With respect to their claim for
exemplary damages, the heirs relied upon Article 2232 of
the Civil Code which provides that in contracts and quasi-
contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner. And, since Padilla was
declared by the trial court to have been grossly negligent in
driving the taxicab, the heirs claimed that they are likewise
entitled to exemplary damages.
After G & S filed its Opposition (To Plaintiffs’ Motion for
Partial Reconsideration),15 the trial court issued an
Order16on March 5, 2002. It found merit in the heirs’
Motion for Partial Reconsideration and thus declared them
entitled to moral and exemplary damages, viz:
WHEREFORE, the decision dated December 27, 2001 is
hereby modified so as to order defendant Corporation to pay
plaintiffs the amount of P300,000.00 as moral damages
and P50,000.00 as exemplary damages. The dispositive
portion of said decision is hereby amended to read as
follows:
‘WHEREFORE, defendant is hereby adjudged guilty of
breach of contract of carriage and is ordered to pay plaintiffs
the following amounts:
1. ₱50,000.00 as civil indemnity for the death of the
deceased Jose Marcial K. Ochoa;
14
2. ₱6,537,244.96 for the loss of earning capacity of the
deceased.
3. ₱300,000.00 as moral damages;
4. ₱50,000.00 as exemplary damages;
5. ₱100,000.00 for attorney’s fees;
6. And the costs of litigation.’
SO ORDERED.17
Because of this, G & S filed another Notice of Appeal18 and
same was given due course by the trial court in an
Order19 dated April 23, 2002.
Ruling of the Court of Appeals
Before the CA, G & S continued to insist that it exercised the
diligence of a good father of the family in the selection and
supervision of its employees. It averred that it has been
carrying out not only seminars for its drivers even before
they were made to work, but also periodic evaluations for
their performance. Aside from these, it has also been
conducting monthly check-up of its automobiles and has
regularly issued rules regarding the conduct of its drivers. G
& S claimed that it was able to establish a good name in the
industry and maintain a clientele.
In an effort to build up Padilla’s character as an experienced
and careful driver, G & S averred that: (1) before G & S
employed Padilla, he was a delivery truck driver of Inter
Island Gas Service for 11 years; (2) Padilla has been an
employee of G & S from 1989 to 1996 and during said
period, there was no recorded incident of his being a
negligent driver; (3) despite his qualifications, G & S still
required Padilla to submit an NBI clearance, driver’s license
and police clearance; (4) Padilla’s being a good driver-
employee was manifest in his years of service with G & S, as
in fact, he has received congratulatory messages from the
latter as shown by the inter-office memos dated August 23,
1990 and February 1, 1993; and that (5) Padilla attended a
seminar at the Pope Pius Center sometime in December
1999 as part of the NAIA Taxi Operation Program.
G & S also argued that the proximate cause of Jose Marcial’s
death is a fortuitous event and/or the fault or negligence of
another and not of its employee. According to G & S, the
collision was totally unforeseen since Padilla had every right
to expect that the delivery van would just overtake him and
not hit the right side of the taxicab. Therefore, what
transpired was beyond Padilla’s control. There was no
negligence on his part but on the part of the driver of the
delivery van. For this reason, G & S opined that it was not
liable to the heirs.

On the other hand, the heirs maintained that Padilla was
grossly negligent in driving the Avis taxicab on the night of
March 10, 1995. They claimed that Padilla, while running at
a very high speed, acted negligently when he tried to
overtake a ten-wheeler truck at the foot of the fly-over. This
forced him to swerve to the left and as a consequence, the
Avis taxicab hit the center of the railing and was split into
two upon hitting the ground. The manner by which Padilla
drove the taxicab clearly showed that he acted without
regard to the safety of his passenger.
The heirs also averred that in order for a fortuitous event to
exempt one from liability, it is necessary that he has
committed no negligence or conduct that may have
occasioned the loss. Thus, to be exempt from liability for the
death of Jose Marcial on this ground, G & S must clearly
show that the proximate cause of the casualty was entirely
independent of human will and that it was impossible to
avoid. And since in the case at bar it was Padilla’s
inexcusable poor judgment, utter lack of foresight and
extreme negligence which were the immediate and
proximate causes of the accident, same cannot be
considered to be due to a fortuitous event. This is bolstered
by the fact that the court trying the case for criminal
negligence arising from the same incident convicted Padilla
for said charge.20
At any rate, the heirs contended that regardless of whether
G & S observed due diligence in the selection of its
employees, it should nonetheless be held liable for the death
of Jose Marcial pursuant to Article 1759 of the Civil Code
which provides:
ART. 1759 – Common carriers are liable for the death of or
injuries to passengers through the negligence or willful acts
of the former’s employees, although such employees may
have acted beyond the scope of their authority or in
violation of the orders of the common carriers.
This liability of the common carriers does not cease upon
proof that they exercised all the diligence of a good father of
a family in the selection and supervision of their employees.
In sum, the heirs prayed that the appeal be dismissed for
lack of merit and the assailed Decision and Order of the trial
court be affirmed in toto.
In a Decision21 dated June 29, 2005, the CA ruled in favor of
the heirs. The appellate court gave weight to their argument
that in order for a fortuitous event to exempt one from
liability, it is necessary that he committed no negligence or
misconduct that may have occasioned the loss. In this case,
the CA noted that Padilla failed to employ reasonable
foresight, diligence and care needed to exempt G & S from
liability for Jose Marcial’s death. Said court also quoted
pertinent portions of the MTC decision convicting Padilla of
reckless imprudence resulting in homicide to negate G & S’
claim that the proximate cause of the accident was the fault
of the driver of the delivery van who allegedly hit the right
side of the taxicab. And just like the trial court, the CA found
insufficient the evidence adduced by G & S to support its
claim that it exercised due diligence in the selection and
supervision of its employees.
With respect to the award of ₱6,537,244.96 for Jose
Marcial’s loss of earning capacity, the CA declared the same
unwarranted. It found the Certification22 issued by Jose
Marcial’s employer, the United States Agency for
International Development (USAID) through its Chief of
Human Resources Division Jonas Cruz (Cruz), as self-
serving, unreliable, and biased. While said certification
states that Jose Marcial was earning an annual salary of
₱450,844.49 at the time of his untimely demise, the CA
noted that same is unsupported by competent evidence such
as income tax returns or receipts. This is in view of the
ruling in People v. Ereño23 where it was held that "there
must be unbiased proof of the deceased’s average income."
Anent moral damages, the CA found the award of
₱300,000.00 excessive and thus reduced the same to
₱200,000.00 as to make it proportionate to the award of
exemplary damages which is ₱50,000.00. The dispositive
portion of said Decision reads:
WHEREFORE, the assailed Decision dated December 27,
2001 and Order dated March 5, 2002 are AFFIRMED with
the following MODIFICATION: appellant is ordered to pay
appellees the sum of ₱50,000.00 as civil indemnity for the
death of the deceased Jose Marcial K. Ochoa, ₱200,000.00
as moral damages, ₱50,000.00 as exemplary damages,
₱100,000.00 for attorney’s fees and the costs of litigation.
The trial court’s award of ₱6,537,244.96 for the loss of
earning capacity of the deceased is DELETED for lack of
basis.
SO ORDERED.
Both parties moved for reconsideration24 but the CA denied
their respective motions for reconsideration in a
Resolution25 dated October 12, 2005.
Hence, G & S and the heirs filed their respective Petitions
for Review on Certiorari before this Court. The heirs’
15
petition was docketed as G.R. No. 170071 and that of G & S
as G.R. No. 170125. These petitions were later consolidated
pursuant to this Court’s Resolution of November 21, 2005.26
G.R. No. 170125
G & S anchors its petition on the following grounds:
I. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT RULING THAT THE PROXIMATE CAUSE
OF DEATH OF MR. JOSE MARCIAL K. OCHOA WAS A
FORTUITOUS EVENT AND/OR WAS DUE TO THE
FAULT OR NEGLIGENCE OF ANOTHER AND SHOULD
THUS EXEMPT THE PETITIONER FROM LIABILITY.
II. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT TAKING NOTE OF THE FACT THAT THE
PETITIONER’S EMPLOYEE HAD BEEN ACQUITTED OF
THE CRIME OF RECKLESS IMPRUDENCE RESULTING
(IN) HOMICIDE.
III. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN UPHOLDING THE TESTIMONY OF A
WITNESS WHO SURFACED MONTHS AFTER THE
INCIDENT WHILE DISREGARDING THAT OF AN
EYEWITNESS WHO WAS PRESENT AT THE TIME AND
PLACE OF THE ACCIDENT.
IV. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT RULING THAT THE PETITIONER
EXERCISED THE DILIGENCE OF A GOOD FATHER OF A
FAMILY IN THE SELECTION AND SUPERVISION OF ITS
EMPLOYEES PARTICULARLY MR. BIBIANO PADILLA.27
G & S reiterates its arguments that the proximate cause of
the accident is a fortuitous event and/or the negligence of
the driver of the delivery van which bumped the right
portion of its taxicab and, that it exercised the diligence of a
good father of a family in the selection and supervision of its
employees. It faults the CA when it overlooked the fact that
the MTC Decision convicting Padilla of reckless imprudence
has already been reversed on appeal by the RTC with Padilla
having been accordingly acquitted of the crime charged.
Moreover, it claims that the appellate court erred in
according respect to the testimony of the lone prosecution
witness, Pablo Clave (Clave), when it concluded that Padilla
was driving negligently at the time of the accident. It asserts
that Clave is not a credible witness and so is his testimony.
Thus, G & S prays that the assailed CA Decision and
Resolution be reversed and set aside.

On the other hand, the heirs posit that the determination of
the issues raised by G & S necessarily entails a re-
examination of the factual findings which this Court cannot
do in this petition for review on certiorari. At any rate, they
maintain that the trial court itself is convinced of Clave’s
credibility. They stress the settled rule that the evaluation of
the credibility of witnesses is a matter that particularly falls
within the authority of the trial court because it had the
opportunity to observe the demeanor of the witnesses on the
stand.
The heirs assert that fortuitous event was not the proximate
cause of the mishap. They point out that as correctly found
by the trial court, Padilla was running at an extremely high
speed. This was why the impact was so strong when the
taxicab rammed the fly-over railings and was split into two
when it hit the ground. Also, while it is true that the MTC
Decision in the criminal case for reckless imprudence has
been reversed by the RTC, this does not excuse G & S from
its liability to the heirs because its liability arises from its
breach of contract of carriage and from its negligence in the
selection and supervision of its employees. Also, since the
acquittal of Padilla is based on reasonable doubt, same does
not in any way rule out his negligence as this may merely
mean that the prosecution failed to meet the requisite
quantum of evidence to sustain his conviction. Therefore, G
& S cannot bank on said acquittal to disprove its liability.
G.R. No. 170071
The heirs, on the other hand, advance the following grounds
in support of their petition:
THE COURT OF APPEALS MANIFESTLY AND GRAVELY
ERRED IN COMPLETELY DELETING THE TRIAL
COURT’S AWARD FOR THE LOSS OF EARNING
CAPACITY OF THE DECEASED.
THE COURT OF APPEALS MANIFESTLY AND GRAVELY
ERRED IN REDUCING THE TRIAL COURT’S AWARD
FOR MORAL DAMAGES.28
The focal point of the heirs’ petition is the CA’s deletion of
the award of ₱6,537,244.96 for Jose Marcial’s loss of
earning capacity as well as the reduction of the award of
moral damages from ₱300,000.00 to ₱200,000.00.
The heirs aver that the appellate court gravely erred in
relying upon Ereño as said case is not on all fours with the
present case. They contend that in Ereño, this Court
disallowed the award for loss of income because the only
16
proof presented was a handwritten statement of the victim’s the award of moral damages appropriate in view of the
spouse stating the daily income of the deceased as a self- settled rule that moral damages are not meant to enrich the
employed fish vendor. The heirs argue that the reason why complainant at the expense of the defendant. Hence, it
this Court declared said handwritten statement as self- prays that the petition be dismissed for lack of merit.
serving is because the one who prepared it, the deceased’s
wife, was also the one who would directly and personally Our Ruling
benefit from such an award.29 This cannot be said in the We shall first tackle the issues raised by G & S in its petition.
case at bar since the same bias and personal interest cannot
be attributed to Jose Marcial’s employer, the USAID. Unlike
in Ereño, USAID here does not stand to be benefited by an The first, third and fourth issues raised by G & S involve
award for Jose Marcial’s loss of earning capacity. Clearly, questions of fact
the Certification issued by it is far from being self-serving.
At any rate, the heirs contend that Ereño has already been We have reviewed said issues and we find that the
superseded by Pleyto v. Lomboy30where this Court held that determination of the first, third and fourth issues raised
in awarding damages for loss of earning capacity, "mere entails re-examination of the evidence presented because
testimonial evidence suffices to establish a basis for which they all involve questions of fact. In Microsoft Corporation
the court can make a fair and reasonable estimate of the loss v. Maxicorp, Inc.,32 we held that:
of earning capacity". In addition, the heirs point out that the
authenticity and accuracy of said Certification was neither
Once it is clear that the issue invites a review of the evidence
questioned by G & S nor discredited by any controverting
presented, the question posed is one of fact. If the query
evidence. In fact, its admission by the trial court was not
requires a re-evaluation of the credibility of witnesses, or
even assigned by G & S as an error in their appeal before the
the existence or relevance of surrounding circumstances and
CA.
their relation to each other, the issue in that query is factual.
Our ruling in Paterno v. Paterno is illustrative on this point:
As to the reduction of moral damages, the heirs claim that
since the CA agreed with the factual circumstances of the
Such questions as whether certain items of evidence should
case as found by the trial court, there is therefore no reason
be accorded probative value or weight, or rejected as feeble
for it to alter the award of damages arising from such factual
or spurious, or whether or not the proof on one side or the
circumstances. They aver that the CA may only modify the
other are clear and convincing and adequate to establish a
damages awarded by the trial court when it is excessive and
proposition in issue, are without doubt questions of fact.
scandalous as held in Meneses v. Court of Appeals.31 Here,
Whether or not the body of proofs presented by a party,
they claim that the award of moral damages in the amount
weighed and analyzed in relation to contrary evidence
of ₱300,000.00 cannot be considered as excessive and
submitted by adverse party, may be said to be strong, clear
unreasonable but only commensurate to the sufferings
and convincing; whether or not certain documents
caused by the incident to a wife who became a young widow
presented by one side should be accorded full faith and
at the age of 33 and to two minor children who lost a father.
credit in the face of protests as to their spurious character by
Moreover, the heirs aver that the CA should not have
the other side; whether or not inconsistencies in the body of
reduced the award of moral damages just to make said
proofs of a party are of such a gravity as to justify refusing to
amount proportionate to the exemplary damages awarded.
give said proofs weight – all these are issues of fact.
This is because there is no such rule which dictates that the
(Citations omitted)
amount of moral damages should be proportionate to that
of the exemplary damages. The heirs pray that the assailed
CA Decision and Resolution be reversed and set aside In this case, the said three issues boil down to the
determination of the following questions: What is the
insofar as they deleted the award for loss of earning capacity
proximate cause of the death of Jose Marcial? Is the
and reduced the award for moral damages.
testimony of prosecution witness Clave credible? Did G & S
exercise the diligence of a good father of a family in the
For its part, G & S avers that the Certification issued by
selection and supervision of its employees? Suffice it to say
USAID is self-serving because the USAID officer who issued
that these are all questions of fact which require this Court
it has not been put on the witness stand to validate the
to inquire into the probative value of the evidence presented
contents thereof. Moreover, said Certification was not
before the trial court. As we have consistently held, "[t]his
supported by competent evidence such as income tax
Court is not a trier of facts. It is not a function of this court
returns and receipts. G & S likewise finds the reduction of

to analyze or weigh evidence. When we give due course to
such situations, it is solely by way of exception. Such
exceptions apply only in the presence of extremely
meritorious circumstances."33 Here, we note that although
G & S enumerated in its Consolidated Memorandum34 the
exceptions35 to the rule that a petition for review
on certiorarishould only raise questions of law, it
nevertheless did not point out under what exception its case
falls. And, upon review of the records of the case, we are
convinced that it does not fall under any. Hence, we cannot
proceed to resolve said issues and disturb the findings and
conclusions of the CA with respect thereto. As we declared
in Diokno v. Cacdac:36
It is aphoristic that a re-examination of factual findings
cannot be done through a petition for review
on certiorariunder Rule 45 of the Rules of Court because as
earlier stated, this Court is not a trier of facts; it reviews only
questions of law. The Supreme Court is not duty-bound to
analyze and weigh again the evidence considered in the
proceedings below. This is already outside the province of
the instant Petition for Certiorari. [Citations omitted.]
There is a contract of carriage between G & S and Jose
Marcial
What is clear from the records is that there existed a
contract of carriage between G & S, as the owner and
operator of the Avis taxicab, and Jose Marcial, as the
passenger of said vehicle. As a common carrier, G & S "is
bound to carry [Jose Marcial] safely as far as human care
and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all the
circumstances."37 However, Jose Marcial was not able to
reach his destination safely as he died during the course of
the travel. "In a contract of carriage, it is presumed that the
common carrier is at fault or is negligent when a passenger
dies or is injured. In fact, there is even no need for the court
to make an express finding of fault or negligence on the part
of the common carrier. This statutory presumption may
only be overcome by evidence that the carrier exercised
extraordinary diligence."38 Unfortunately, G & S miserably
failed to overcome this presumption. Both the trial court
and the CA found that the accident which led to Jose
Marcial’s death was due to the reckless driving and gross
negligence of G & S’ driver, Padilla, thereby holding G & S
liable to the heirs of Jose Marcial for breach of contract of
carriage.
The acquittal of Padilla in the criminal case is immaterial
to the instant case for breach of contract
This thus now leaves us with the remaining issue raised by
G & S, that is, whether the CA gravely erred in not taking
note of the fact that Padilla has already been acquitted of
the crime of reckless imprudence resulting in homicide, a
charge which arose from the same incident subject of this
case.
Article 31 of the Civil Code provides, viz:
When the civil action is based on an obligation not arising
from the act or omission complained of as a felony, such
civil action may proceed independently of the criminal
proceedings and regardless of the result of the latter.
Thus, in Cancio, Jr. v. Isip,39 we declared:
In the instant case, it must be stressed that the action filed
by petitioner is an independent civil action, which remains
separate and distinct from any criminal prosecution based
on the same act. Not being deemed instituted in the
criminal action based on culpa criminal, a ruling on the
culpability of the offender will have no bearing on
said independent civil action based on an entirely
different cause of action, i.e., culpa contractual."
(Emphasis supplied; Citations omitted.)
In this case, the action filed by the heirs is primarily for the
recovery of damages arising from breach of contract of
carriage allegedly committed by G & S. Clearly, it is an
independent civil action arising from contract which is
separate and distinct from the criminal action for reckless
imprudence resulting in homicide filed by the heirs against
Padilla by reason of the same incident. Hence, regardless of
Padilla’s acquittal or conviction in said criminal case, same
has no bearing in the resolution of the present case. There
was therefore no error on the part of the CA when it
resolved this case without regard to the fact that Padilla has
already been acquitted by the RTC in the criminal case.
Moreover, while the CA quoted some portions of the MTC
Decision in said criminal case, we however find that those
quoted portions were only meant to belie G & S’ claim that
the proximate cause of the accident was the negligence of
the driver of the delivery van which allegedly hit the Avis
taxicab. Even without those quoted portions, the appellate
court’s ultimate finding that it was Padilla’s negligence
which was the proximate cause of the mishap would still be
the same. This is because the CA has, in fact, already made
this declaration in the earlier part of its assailed Decision.
The fact that the MTC Decision from which the subject
17
quoted portions were lifted has already been reversed by the
RTC is therefore immaterial.
In view of the foregoing, we deny G & S’ petition for lack of
merit.
The denial by the CA of the heirs’ claim for lost earnings is
unwarranted
Going now to the petition filed by the heirs, we note at the
outset that the issues of whether the CA erred in deleting the
award for loss of earning capacity and in reducing the award
for moral damages made by the trial court likewise raise
questions of fact as they "involve an examination of the
probative value of the evidence presented by the
parties".40 However, we find that the heirs’ case falls under
one of the exceptions because the findings of the CA conflict
with the findings of the RTC.41 Since the heirs properly
raised the conflicting findings of the lower courts, it is
proper for this Court to resolve such contradiction.42
In Ereño, we denied the claim for loss of income because the
handwritten estimate of the deceased’s daily income as a
self-employed vendor was not supported by competent
evidence like income tax returns or receipts. This was in
view of the rule that compensation for lost income is in the
nature of damages and as such requires due proof of
damages suffered. We reiterated this rule in People v.
Yrat43 where we likewise denied the same claim because the
only evidence presented to show that the deceased was
earning ₱50,000.00 a month was the testimony of the wife.
There we stated that for lost income due to death, there
must be unbiased proof of the deceased’s average income.
Self-serving, hence, unreliable statement is not enough.
In People v. Caraig,44 we declared that "documentary
evidence should be presented to substantiate the claim for
damages for loss of earning capacity. By way of exception,
damages therefor may be awarded despite the absence of
documentary evidence, provided that there is testimony that
the victim was either (1) self-employed earning less than
the minimum wage under current labor laws, and judicial
notice may be taken of the fact that in the victim’s line of
work no documentary evidence is available; or
(2) employed as a daily-wage worker earning less than the
minimum wage under current labor laws". However, we
subsequently ruled in Pleyto v. Lomboy45 that "failure to
present documentary evidence to support a claim for loss of
earning capacity of the deceased need not be fatal to its
cause. Testimonial evidence suffices to establish a basis for
which the court can make a fair and reasonable estimate of
the loss of earning capacity". Hence, we held as sufficient to

establish a basis for an estimate of damages for loss of
earning capacity the testimony of the victim’s widow that
her husband was earning a monthly income of ₱8,000.00.
Later, in Victory Liner, Inc. v. Gammad,46 after finding that
the deceased’s earnings does not fall within the exceptions
laid down in Caraig, we deleted the award for compensatory
damages for loss of earning capacity as same was awarded
by the lower courts only on the basis of the husband’s
testimony that the deceased was 39 years of age and a
Section Chief of the Bureau of Internal Revenue with a
salary of ₱83,088.00 per annum at the time of her death.
This same rule was also applied in the 2008 case of Licyayo
v. People.47
In all of the cases mentioned except for Ereño, the sole basis
for the claim for loss of earning capacity were the
testimonies of the claimants. This is not the case here. Just
like in Ereño where the testimony of the mother of the
deceased was accompanied by a handwritten estimate of her
daughter’s alleged income as a fish vendor, the testimony of
Jose Marcial’s wife that he was earning around
₱450,000.00 a year was corroborated by a Certification
issued by the USAID. However in Ereño, we declared as
self-serving the handwritten estimate submitted by the
mother hence we denied the claim for such award. Based on
said ruling, the CA in this case deleted the award for lost
income after it found the USAID Certification to be self-
serving and unreliable.
We disagree. The CA sweepingly concluded that the USAID
Certification is self-serving and unreliable without
elaborating on how it was able to arrive at such a
conclusion. A research on USAID reveals that it is the
"principal [United States] agency to extend assistance to
countries recovering from disaster, trying to escape poverty,
and engaging in democratic reforms."48 It is an
"independent federal government agency that receives over-
all foreign policy guidance from the Secretary of the State
[of the United States]."49 Given this background, it is highly
improbable that such an agency will issue a certification
containing unreliable information regarding an employee’s
income. Besides, there exists a presumption that official
duty has been regularly performed.50 Absent any showing to
the contrary, it is presumed that Cruz, as Chief of Human
Resources Division of USAID, has regularly performed his
duty relative to the issuance of said certification and
therefore, the correctness of its contents can be relied upon.
This presumption remains especially so where the
authenticity, due execution and correctness of said
certification have not been put in issue either before the trial
court or the CA. As to its being self-serving, our discussion
on "self-serving evidence" in Heirs of Pedro Clemeña y
Zurbano v. Heirs of Irene B. Bien51 is enlightening, viz:
‘Self-serving evidence,’ perhaps owing to its descriptive
formulation, is a concept much misunderstood. Not
infrequently, the term is employed as a weapon to devalue
and discredit a party's testimony favorable to his cause.
That, it seems, is the sense in which petitioners are using it
now. This is a grave error. "Self-serving evidence" is not to
be taken literally to mean any evidence that serves its
proponent's interest. The term, if used with any legal
sense, refers only to acts or declarations made by a
party in his own interest at some place and time out
of court x x x. (Citations omitted; emphasis supplied.)
Verily, the USAID certification cannot be said to be self-
serving because it does not refer to an act or declaration
made out of court by the heirs themselves as parties to this
case.1awphi1
Clearly, the CA erred in deleting the award for lost income
on the ground that the USAID Certification supporting such
claim is self-serving and unreliable. On the contrary, we find
said certification sufficient basis for the court to make a fair
and reasonable estimate of Jose Marcial’s loss of earning
capacity just like in Tamayo v. Señora52where we based the
victim’s gross annual income on his pay slip from the
Philippine National Police. Hence, we uphold the trial
court’s award for Jose Marcial’s loss of earning capacity.
While the trial court applied the formula generally used by
the courts to determine net earning capacity which is, to wit:
Net Earning Capacity = life expectancy* x (gross annual
income - reasonable living expenses),53
*Life
expectancy = 2/3 (80 – age of the deceased)
we, however, find incorrect the amount of ₱6,537, 244.96
arrived at. The award should be ₱6,611,634.59 as borne out
by the following computation:
2 (80-3654)
Net earning capacity
x 450,844.4955-50%56
=
3
88
= x 225,422.25
3 has always time for her[. H]e is a family man, so it’s really a
= 29.33 x 225,422.25
18
= ₱6, 611,634.59
The award of moral damages should be modified
While we deemed it proper to modify the amount of moral
damages awarded by the trial court as discussed below, we
nevertheless agree with the heirs that the CA should not
have pegged said award in proportion to the award of
exemplary damages. Moral and exemplary damages are
based on different jural foundations.57 They are different in
nature and require separate determination.58 The amount of
one cannot be made to depend on the other.
In Victory Liner Inc. v. Gammad59 we awarded
₱100,000.00 by way of moral damages to the husband and
three children of the deceased, a 39-year old Section Chief of
the Bureau of Internal Revenue, to compensate said heirs
for the grief caused by her death. This is pursuant to the
provisions of Articles 1764 and 2206(3) which provide:
Art. 1764. Damages in cases comprised in this Section shall
be awarded in accordance with Title XVIII of this Book,
concerning Damages. Articles 2206 shall also apply to the
death of a passenger caused by the breach of contract by a
common carrier.
Art. 2206. x x x (3) The spouse, legitimate and illegitimate
descendants and the ascendants of the deceased may
demand moral damages for mental anguish by reason of the
death of the deceased.
Here, there is no question that the heirs are likewise entitled
to moral damages pursuant to the above provisions,
considering the mental anguish suffered by them by reason
of Jose Marcial’s untimely death, as can be deduced from
the following testimony of his wife Ruby:
Atty. Suarez:
Q: How would you describe Jose Marcial Ochoa?
(Ruby) A: My husband was a very loving husband, faithful
husband, a very [good] provider[.] I depended on him so
much financially [and] emotionally[.] He was practically my
life then.
Q: How is he as a father?
A: A very good father, he is very committed to Micaela[. H]e
great [loss] to me and to Micaela.

Q: What was your reaction upon learning of your husband’s
death?
A: Immediately after I learned of his death, I tried very hard
to keep a clear mind for my little girl, she was 3 ½ and she
could not grasp what death is, so I found [it] so hard to
explain to her [at] that time what happened [e]specially
[because] she just talked to her father from the airport
telling her that he is coming home, tapos hindi na pala.
Q: How did it affect you?
A: It was a painful struggle everyday just to get up and move
on when someone who [you] really really love and [who] is
important to you … it is very hard to move on and [it is
even] harder to move on [when] I found out that I was
pregnant with my second child, parang tinabunan ka [ng]
lahat eh[. I]t’s [too] hard to find happiness, you’re pregnant,
when you know wala naman talagang father yung bata later
on x x xx x x x
Q: How did this affect your family?
A: Yung effect kay Micaela, she [used] to be a gregarious
child, yung happy ganyan, but nung wala na yong father
niya that time, [during] graduation ng nursery that time
naging very very [quiet] siya, so a lot of emotional support
from my own family was given to her at the time para
makacope-up siya sa loss kasi she is very close to the father.
Q: Financially, how did it affect you?
A: I had to make do of what was left by my husband, I
couldn’t also work so much at the time because I was….and
hirap eh, I cannot find enthusiasm in what I do, tapos
pregnant pa ako, and hirap talaga.
Q: How else did it affect you?
A: We had to move houses like we used to live in Quezon
City at (the) time of his death, tapos kinuha kami ni Gorjie
my brother-in-law sa compound nila para hindi… [to]
support us emotionally (at that time) kasi nga I was
pregnant and then I also decided to move (to make it easy
for me) to adjust yung lifestyle ng mga bata, because I
cannot cope [here] financially on my own[. N]ahihirapan na
ako dito because the living expenses here are quite high
compared sa probinsiya so I decided to move.
Q: If you would assign that pain and suffering that you
suffered as a result of the death of your husband, what will
be the monetary consideration?
A: I struggled with that kasi….I can honestly say no amount
of money can ever repay the [loss] that my children
suffered, future nila yan eh, and my son was not given a
chance to get to know his father, so I cannot imagine kung
ano yung sinasabi n’yong amount that will compensate the
suffering that I have to go through and my children will go
through, ‘yon and mahirap bayaran.60
Under this circumstance, we thus find as sufficient and
"somehow proportional to and in approximation of the
suffering inflicted"61 an award of moral damages in an
amount similar to that awarded in Victory which is
₱100,000.00.
From the above discussion, we, thus, partly grant the heirs’
petition.
WHEREFORE, the petition for review on certiorari in G.R.
No. 170071 is PARTLY GRANTED while the petition in G.R.
No. 170125 is DENIED. The assailed Decision and
Resolution dated June 29, 2005 and October 12, 2005 of the
Court of Appeals in CA-G.R. CV No. 75602 are AFFIRMED
with the MODIFICATIONS that G & S is ordered to pay the
heirs of Jose Marcial K. Ochoa the sum of ₱6,611,634.59 for
loss of earning capacity of the deceased and ₱100,000.00 as
moral damages.
SO ORDERED.
SECOND DIVISION
G.R. No. 169467 February 25, 2010
ALFREDO P. PACIS and CLEOPATRA D.
PACIS, Petitioners,
vs. JEROME JOVANNE MORALES, Respondent.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 11 May 2005
Decision2 and the 19 August 2005 Resolution of the Court of
Appeals in CA-G.R. CV No. 60669.
The Facts
On 17 January 1995, petitioners Alfredo P. Pacis and
Cleopatra D. Pacis (petitioners) filed with the trial court a
civil case for damages against respondent Jerome Jovanne
Morales (respondent). Petitioners are the parents of Alfred
Dennis Pacis, Jr. (Alfred), a 17-year old student who died in
a shooting incident inside the Top Gun Firearms and
Ammunitions Store (gun store) in Baguio City. Respondent
is the owner of the gun store.
The facts as found by the trial court are as follows:
On January 19, 1991, Alfred Dennis Pacis, then 17 years old
and a first year student at the Baguio Colleges Foundation
taking up BS Computer Science, died due to a gunshot
19
wound in the head which he sustained while he was at the
Top Gun Firearm[s] and Ammunition[s] Store located at
Upper Mabini Street, Baguio City. The gun store was owned
and operated by defendant Jerome Jovanne Morales.
With Alfred Pacis at the time of the shooting were Aristedes
Matibag and Jason Herbolario. They were sales agents of
the defendant, and at that particular time, the caretakers of
the gun store.
The bullet which killed Alfred Dennis Pacis was fired from a
gun brought in by a customer of the gun store for repair.
The gun, an AMT Automag II Cal. 22 Rimfire Magnum with
Serial No. SN-H34194 (Exhibit "Q"), was left by defendant
Morales in a drawer of a table located inside the gun store.
Defendant Morales was in Manila at the time. His employee
Armando Jarnague, who was the regular caretaker of the
gun store was also not around. He left earlier and requested
sales agents Matibag and Herbolario to look after the gun
store while he and defendant Morales were away. Jarnague
entrusted to Matibag and Herbolario a bunch of keys used
in the gun store which included the key to the drawer where
the fatal gun was kept.
It appears that Matibag and Herbolario later brought out
the gun from the drawer and placed it on top of the table.
Attracted by the sight of the gun, the young Alfred Dennis
Pacis got hold of the same. Matibag asked Alfred Dennis
Pacis to return the gun. The latter followed and handed the
gun to Matibag. It went off, the bullet hitting the young
Alfred in the head.
A criminal case for homicide was filed against Matibag
before branch VII of this Court. Matibag, however, was
acquitted of the charge against him because of the
exempting circumstance of "accident" under Art. 12, par. 4
of the Revised Penal Code.
By agreement of the parties, the evidence adduced in the
criminal case for homicide against Matibag was reproduced
and adopted by them as part of their evidence in the instant
case.3
On 8 April 1998, the trial court rendered its decision in
favor of petitioners. The dispositive portion of the decision
reads:

WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiffs [Spouses Alfredo P. Pacis
and Cleopatra D. Pacis] and against the defendant [Jerome
Jovanne Morales] ordering the defendant to pay plaintiffs —
(1) ₱30,000.00 as indemnity for the death of Alfred Pacis;
(2) ₱29,437.65 as actual damages for the hospitalization
and burial expenses incurred by the plaintiffs;
(3) ₱100,000.00 as compensatory damages;
(4) ₱100,000.00 as moral damages;
(5) ₱50,000.00 as attorney’s fees.
SO ORDERED.4
Respondent appealed to the Court of Appeals. In its
Decision5 dated 11 May 2005, the Court of Appeals reversed
the trial court’s Decision and absolved respondent from civil
liability under Article 2180 of the Civil Code.6
Petitioners filed a motion for reconsideration, which the
Court of Appeals denied in its Resolution dated 19 August
2005.
Hence, this petition.
The Trial Court’s Ruling
The trial court held respondent civilly liable for the death of
Alfred under Article 2180 in relation to Article 2176 of the
Civil Code.7 The trial court held that the accidental shooting
of Alfred which caused his death was partly due to the
negligence of respondent’s employee Aristedes Matibag
(Matibag). Matibag and Jason Herbolario (Herbolario) were
employees of respondent even if they were only paid on a
commission basis. Under the Civil Code, respondent is liable
for the damages caused by Matibag on the occasion of the
performance of his duties, unless respondent proved that he
observed the diligence of a good father of a family to prevent
the damage. The trial court held that respondent failed to
observe the required diligence when he left the key to the
drawer containing the loaded defective gun without
instructing his employees to be careful in handling the
loaded gun.
The Court of Appeals’ Ruling
The Court of Appeals held that respondent cannot be held
civilly liable since there was no employer-employee
relationship between respondent and Matibag. The Court of
Appeals found that Matibag was not under the control of
respondent with respect to the means and methods in the
performance of his work. There can be no employer-
employee relationship where the element of control is
absent. Thus, Article 2180 of the Civil Code does not apply
in this case and respondent cannot be held liable.
Furthermore, the Court of Appeals ruled that even if
respondent is considered an employer of Matibag, still
respondent cannot be held liable since no negligence can be
attributed to him. As explained by the Court of Appeals:
Granting arguendo that an employer-employee relationship
existed between Aristedes Matibag and the defendant-
appellant, we find that no negligence can be attributed to
him.
Negligence is best exemplified in the case of Picart vs. Smith
(37 Phil. 809). The test of negligence is this:
"x x x. Could a prudent man, in the position of the person to
whom negligence is attributed, foresee harm to the person
injured as a reasonable consequence of the course about to
be pursued? If so, the law imposes a duty on the actor to
refrain from that course or take precaution against its
mischievous results, and the failure to do so constitutes
negligence. x x x."
Defendant-appellant maintains that he is not guilty of
negligence and lack of due care as he did not fail to observe
the diligence of a good father of a family. He submits that he
kept the firearm in one of his table drawers, which he locked
and such is already an indication that he took the necessary
diligence and care that the said gun would not be accessible
to anyone. He puts [sic] that his store is engaged in selling
firearms and ammunitions. Such items which are per se
dangerous are kept in a place which is properly secured in
order that the persons coming into the gun store would not
be able to take hold of it unless it is done intentionally, such
as when a customer is interested to purchase any of the
firearms, ammunitions and other related items, in which
case, he may be allowed to handle the same.
We agree. Much as We sympathize with the family of the
deceased, defendant-appellant is not to be blamed. He
exercised due diligence in keeping his loaded gun while he
was on a business trip in Manila. He placed it inside the
drawer and locked it. It was taken away without his
knowledge and authority. Whatever happened to the
deceased was purely accidental.8
The Issues
Petitioners raise the following issues:
20
I. THE APPELLATE COURT COMMITTED SERIOUS
ERROR IN RENDERING THE DECISION AND
RESOLUTION IN QUESTION IN DISREGARD OF LAW
AND JURISPRUDENCE BY REVERSING THE ORDER OF
THE REGIONAL TRIAL COURT (BRANCH 59) OF
BAGUIO CITY NOTWITHSTANDING CLEAR,
AUTHENTIC RECORDS AND TESTIMONIES
PRESENTED DURING THE TRIAL WHICH NEGATE AND
CONTRADICT ITS FINDINGS.
II. THE APPELLATE COURT COMMITTED GRAVE,
REVERSIBLE ERROR IN RENDERING THE DECISION
AND RESOLUTION IN QUESTION BY DEPARTING
FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS THEREBY IGNORING THE
FACTUAL FINDINGS OF THE REGIONAL TRIAL COURT
(BRANCH 59) OF BAGUIO CITY SHOWING
PETITIONER’S CLEAR RIGHTS TO THE AWARD OF
DAMAGES.9
The Ruling of the Court
We find the petition meritorious.
This case for damages arose out of the accidental shooting of
petitioners’ son. Under Article 116110 of the Civil Code,
petitioners may enforce their claim for damages based on
the civil liability arising from the crime under Article
10011 of the Revised Penal Code or they may opt to file an
independent civil action for damages under the Civil Code.
In this case, instead of enforcing their claim for damages in
the homicide case filed against Matibag, petitioners opted to
file an independent civil action for damages against
respondent whom they alleged was Matibag’s employer.
Petitioners based their claim for damages under Articles
2176 and 2180 of the Civil Code.
Unlike the subsidiary liability of the employer under Article
10312 of the Revised Penal Code,13 the liability of the
employer, or any person for that matter, under Article 2176
of the Civil Code is primary and direct, based on a person’s
own negligence. Article 2176 states:
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is
called quasi-delict and is governed by the provisions of this
Chapter.
This case involves the accidental discharge of a firearm
inside a gun store.1avvphi1 Under PNP Circular No. 9,

entitled the "Policy on Firearms and Ammunition
Dealership/Repair," a person who is in the business of
purchasing and selling of firearms and ammunition must
maintain basic security and safety requirements of a gun
dealer, otherwise his License to Operate Dealership will be
suspended or canceled.14
Indeed, a higher degree of care is required of someone who
has in his possession or under his control an instrumentality
extremely dangerous in character, such as dangerous
weapons or substances. Such person in possession or
control of dangerous instrumentalities has the duty to take
exceptional precautions to prevent any injury being done
thereby.15 Unlike the ordinary affairs of life or business
which involve little or no risk, a business dealing with
dangerous weapons requires the exercise of a higher degree
of care.
As a gun store owner, respondent is presumed to be
knowledgeable about firearms safety and should have
known never to keep a loaded weapon in his store to avoid
unreasonable risk of harm or injury to others. Respondent
has the duty to ensure that all the guns in his store are not
loaded. Firearms should be stored unloaded and separate
from ammunition when the firearms are not needed for
ready-access defensive use.16 With more reason, guns
accepted by the store for repair should not be loaded
precisely because they are defective and may cause an
accidental discharge such as what happened in this case.
Respondent was clearly negligent when he accepted the gun
for repair and placed it inside the drawer without ensuring
first that it was not loaded. In the first place, the defective
gun should have been stored in a vault. Before accepting the
defective gun for repair, respondent should have made sure
that it was not loaded to prevent any untoward accident.
Indeed, respondent should never accept a firearm from
another person, until the cylinder or action is open and he
has personally checked that the weapon is completely
unloaded.17 For failing to insure that the gun was not
loaded, respondent himself was negligent. Furthermore, it
was not shown in this case whether respondent had a
License to Repair which authorizes him to repair defective
firearms to restore its original composition or enhance or
upgrade firearms.18
Clearly, respondent did not exercise the degree of care and
diligence required of a good father of a family, much less the
degree of care required of someone dealing with dangerous
weapons, as would exempt him from liability in this case.
WHEREFORE, we GRANT the petition. We SET ASIDE the
11 May 2005 Decision and the 19 August 2005 Resolution of
the Court of Appeals in CA-G.R. CV No. 60669. We
REINSTATE the trial court’s Decision dated 8 April 1998.
SO ORDERED.
PHILIPPINE HAWK CORPORATION, vs.
VIVIAN TAN LEE
FIRST DIVISION
G.R. No. 172122 June 22, 2007
MERCURY DRUG CORPORATION and ROLANDO
J. DEL ROSARIO, petitioners,
vs. SPOUSES RICHARD HUANG and CARMEN
HUANG, and STEPHEN HUANG, respondents.
DECISION
PUNO, C.J.:
On appeal are the Decision1 and Resolution2 of the Court of
Appeals in CA-G.R. CV No. 83981, dated February 16, 2006
and March 30, 2006, respectively which affirmed with
modification the Decision3 of the Regional Trial Court
(RTC) of Makati City, dated September 29, 2004. The trial
court found petitioners jointly and severally liable to pay
respondents damages for the injuries sustained by
respondent Stephen Huang, son of respondent spouses
Richard and Carmen Huang.
First, the facts:
Petitioner Mercury Drug Corporation (Mercury Drug) is the
registered owner of a six-wheeler 1990 Mitsubishi Truck
with plate number PRE 641 (truck). It has in its employ
petitioner Rolando J. del Rosario as driver. Respondent
spouses Richard and Carmen Huang are the parents of
respondent Stephen Huang and own the red 1991 Toyota
Corolla GLI Sedan with plate number PTT 775 (car).
These two vehicles figured in a road accident on December
20, 1996 at around 10:30 p.m. within the municipality of
Taguig, Metro Manila. Respondent Stephen Huang was
driving the car, weighing 1,450 kg., while petitioner Del
Rosario was driving the truck, weighing 14,058 kg. Both
were traversing the C-5 Highway, north bound, coming
from the general direction of Alabang going to Pasig City.
The car was on the left innermost lane while the truck was
on the next lane to its right, when the truck suddenly
swerved to its left and slammed into the front right side of
the car. The collision hurled the car over the island where it
hit a lamppost, spun around and landed on the opposite
lane. The truck also hit a lamppost, ran over the car and
zigzagged towards, and finally stopped in front of Buellah
Land Church.
21
At the time of the accident, petitioner Del Rosario only had
a Traffic Violation Receipt (TVR). His driver’s license had
been confiscated because he had been previously
apprehended for reckless driving.
The car, valued at ₱300,000.00, was a total wreck.
Respondent Stephen Huang sustained massive injuries to
his spinal cord, head, face, and lung. Despite a series of
operations, respondent Stephen Huang is paralyzed for life
from his chest down and requires continuous medical and
rehabilitation treatment.
Respondents fault petitioner Del Rosario for committing
gross negligence and reckless imprudence while driving,
and petitioner Mercury Drug for failing to exercise the
diligence of a good father of a family in the selection and
supervision of its driver.
In contrast, petitioners allege that the immediate and
proximate cause of the accident was respondent Stephen
Huang’s recklessness. According to petitioner Del Rosario,
he was driving on the left innermost lane when the car
bumped the truck’s front right tire. The truck then swerved
to the left, smashed into an electric post, crossed the center
island, and stopped on the other side of the highway. The
car likewise crossed over the center island and landed on the
same portion of C-5. Further, petitioner Mercury Drug
claims that it exercised due diligence of a good father of a
family in the selection and supervision of all its employees.
The trial court, in its Decision dated September 29, 2004,
found petitioners Mercury Drug and Del Rosario jointly and
severally liable to pay respondents actual, compensatory,
moral and exemplary damages, attorney’s fees, and
litigation expenses. The dispositive portion reads:
WHEREFORE, judgment is rendered finding defendants
Mercury Drug Corporation, Inc. and Rolando del Rosario,
jointly and severally liable to pay plaintiffs Spouses Richard
Y. Huang and Carmen G. Huang, and Stephen Huang the
following amounts:
1. Two Million Nine Hundred Seventy Three Thousand
Pesos (₱2,973,000.00) actual damages;
2. As compensatory damages:
a. Twenty Three Million Four Hundred Sixty One Thousand,
and Sixty-Two Pesos (₱23,461,062.00) for life care cost of
Stephen;
b. Ten Million Pesos (₱10,000,000.00) as and for lost or
impaired earning capacity of Stephen;
3. Four Million Pesos (₱4,000,000.00) as moral damages;

4. Two Million Pesos (₱2,000,000.00) as exemplary
damages; and
5. One Million Pesos (₱1,000,000.00) as attorneys fees and
litigation expense.4
On February 16, 2006, the Court of Appeals affirmed the
decision of the trial court but reduced the award of moral
damages to ₱1,000,000.00. The appellate court also denied
the motion for reconsideration filed by petitioners.
Hence, this appeal.
Petitioners cite the following grounds for their appeal:
1. That the subject Decision which dismissed the appeal of
petitioners herein but AFFIRMED WITH MODIFICATION
the decision of the Regional Trial Court, Branch 64, Makati
City, in that the award of moral damages was reduced to
₱1,000,000.00 and its Resolution dated March 30, 2006,
which dismissed outright the Motion for Reconsideration
must be set aside because the Honorable Court of Appeals
committed reversible error:
A. IN DENYING OUTRIGHTLY THE MOTION FOR
RECONSIDERATION ON ALLEGEDLY BEING FILED OUT
OF TIME FOR ONE DAY;
B. IN ACCORDING GREATER WEIGHT TO THE
EVIDENCE ADDUCED BY THE RESPONDENTS HEREIN
AND COMPLETELY DISREGARDING THE DEFENSE
INTERPOSED BY THE PETITIONERS HEREIN;
C. IN DISREGARDING COMPLETELY ALL EVIDENCES
PRESENTED BY THE PETITIONERS HEREIN AND
PROCEEDED TO RENDER ITS DECISION BASED ON
PRESUMPTIONS AND PERSONAL OPINIONS OF
PEOPLE WHO ARE NOT WITNESSES TO THE
ACCIDENT;
D. IN AWARDING DAMAGES IN FAVOR OF
RESPONDENTS HEREIN;
E. IN FINDING THAT MERCURY DRUG CORPORATION
FAILED TO EXERCISE THE DILIGENCE REQUIRED IN
SUPERVISING ITS EMPLOYEES DESPITE
OVERWHELMING EVIDENCE PRESENTED BY
PETITIONER COMPANY;
F. IN FINDING THAT PETITIONER ROLANDO DEL
ROSARIO WAS NEGLIGENT IN DRIVING THE TRUCK AT
THE TIME OF ACCIDENT AND TOTALLY
DISREGARDING THE EVIDENCES PRESENTED DURING
THE TRIAL OF THE CASE.
G. IN PRESENTING ONLY IN THE DECISION
TESTIMONIES FAVORABLE TO THE RESPONDENTS
HEREIN AND COMPLETELY DISREGARDING THE
EVIDENCES PRESENTED BY THE PETITIONERS
HEREIN WHICH CONTRADICTED SUCH TESTIMONIES
NOT ONLY THROUGH ORAL TESTIMONIES BUT AS
WELL AS DOCUMENTARY EVIDENCES.5
We affirm the findings of the trial court and the appellate
court that petitioner Del Rosario was negligent. The
evidence does not support petitioners’ claim that at the time
of the accident, the truck was at the left inner lane and that
it was respondent Stephen Huang’s car, at its right, which
bumped the right front side of the truck. Firstly, petitioner
Del Rosario could not precisely tell which part of the truck
was hit by the car,6 despite the fact that the truck was snub-
nosed and a lot higher than the car. Petitioner Del Rosario
could not also explain why the car landed on the opposite
lane of C-5 which was on its left side. He said that "the car
did not pass in front of him after it hit him or under him or
over him or behind him."7 If the truck were really at the left
lane and the car were at its right, and the car hit the truck at
its front right side, the car would not have landed on the
opposite side, but would have been thrown to the right side
of the C-5 Highway. Noteworthy on this issue is the
testimony of Dr. Marlon Rosendo H. Daza, an expert in the
field of physics. He conducted a study based on the
following assumptions provided by respondents:
1. Two vehicles collided;
2. One vehicle is ten times heavier, more massive than the
other;
3. Both vehicles were moving in the same direction and at
the same speed of about 85 to 90 kilometers per hour;
4. The heavier vehicle was driving at the innermost left lane,
while the lighter vehicle was at its right.
Dr. Daza testified that given the foregoing assumptions, if
the lighter vehicle hits the right front portion of the heavier
vehicle, the general direction of the light vehicle after the
impact would be to the right side of the heavy vehicle, not
the other way around. The truck, he opined, is more difficult
to move as it is heavier. It is the car, the lighter vehicle,
which would move to the right of, and away from the truck.
22
Thus, there is very little chance that the car will move
towards the opposite side, i.e., to the left of the truck.
Dr. Daza also gave a further study on the basis of the same
assumptions except that the car is on the left side of the
truck, in accordance with the testimony of respondent
Stephen Huang. Dr. Daza concluded that the general
direction of the car after impact would be to the left of the
truck. In this situation, the middle island against which the
car was pinned would slow down the car, and enable the
truck to catch up and hit the car again, before running over
it.8
To support their thesis, petitioners tried to show the
damages that the truck sustained at its front right side. The
attempt does not impress. The photographs presented were
taken a month after the accident, and Rogelio Pantua, the
automechanic who repaired the truck and authenticated the
photographs, admitted that there were damages also on the
left side of the truck.9
Worse still, petitioner Del Rosario further admitted that
after the impact, he lost control of the truck and failed to
apply his brakes. Considering that the car was smaller and
lighter than the six-wheeler truck, the impact allegedly
caused by the car when it hit the truck could not possibly be
so great to cause petitioner to lose all control that he failed
to even step on the brakes. He testified, as follows:
ATTY. DIAZ:
May I proceed, Your Honor. You were able to apply the
brakes, were you sir?
WITNESS:
No more, sir, because I went over the island.
ATTY. DIAZ:
Because as you said you lost control, correct sir?
WITNESS:
Yes, sir.
ATTY. DIAZ:
In other words, sir from the time your truck was hit
according to you up to the time you rested on the shoulder,
you traveled fifty meters?
WITNESS:
Yes, sir, about that distance.
ATTY. DIAZ:
And this was despite the fact that you were only traveling at
the speed of seventy five kilometers per hour, jumped over
the island, hit the lamppost, and traveled the three lanes of
the opposite lane of C-5 highway, is that what you want to
impress upon this court?
WITNESS:
Yes, sir.10

We therefore find no cogent reason to disturb the findings
of the RTC and the Court of Appeals. The evidence proves
petitioner Del Rosario’s negligence as the direct and
proximate cause of the injuries suffered by respondent
Stephen Huang. Petitioner Del Rosario failed to do what a
reasonable and prudent man would have done under the
circumstances.
We now come to the liability of petitioner Mercury Drug as
employer of Del Rosario. Articles 2176 and 2180 of the Civil
Code provide:
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of
this Chapter.
Art. 2180. The obligation imposed by article 2176 is
demandable not only for one’s own acts or omissions, but
also for those of persons for whom one is responsible.
x x x The owners and managers of an establishment or
enterprise are likewise responsible for damages caused by
their employees in the service of the branches in which the
latter are employed or on the occasion of their functions.
x x x The liability of the employer under Art. 2180 of the
Civil Code is direct or immediate. It is not conditioned on a
prior recourse against the negligent employee, or a prior
showing of insolvency of such employee. It is also joint and
solidary with the employee.11
To be relieved of liability, petitioner Mercury Drug should
show that it exercised the diligence of a good father of a
family, both in the selection of the employee and in the
supervision of the performance of his duties. Thus, in the
selection of its prospective employees, the employer is
required to examine them as to their qualifications,
experience, and service records.12 With respect to the
supervision of its employees, the employer should formulate
standard operating procedures, monitor their
implementation, and impose disciplinary measures for their
breach. To establish compliance with these requirements,
employers must submit concrete proof, including
documentary evidence.13
In the instant case, petitioner Mercury Drug presented
testimonial evidence on its hiring procedure. According to
Mrs. Merlie Caamic, the Recruitment and Training Manager
of petitioner Mercury Drug, applicants are required to take
theoretical and actual driving tests, and psychological
examination. In the case of petitioner Del Rosario, however,
Mrs. Caamic admitted that he took the driving tests and
psychological examination when he applied for the position
of Delivery Man, but not when he applied for the position of
Truck Man. Mrs. Caamic also admitted that petitioner Del
Rosario used a Galant which is a light vehicle, instead of a
truck during the driving tests. Further, no tests were
conducted on the motor skills development, perceptual
speed, visual attention, depth visualization, eye and hand
coordination and steadiness of petitioner Del Rosario. No
NBI and police clearances were also presented. Lastly,
petitioner Del Rosario attended only three driving seminars
– on June 30, 2001, February 5, 2000 and July 7, 1984. In
effect, the only seminar he attended before the accident
which occurred in 1996 was held twelve years ago in 1984.
It also appears that petitioner Mercury Drug does not
provide for a back-up driver for long trips. At the time of the
accident, petitioner Del Rosario has been out on the road for
more than thirteen hours, without any alternate. Mrs.
Caamic testified that she does not know of any company
policy requiring back-up drivers for long trips.14
Petitioner Mercury Drug likewise failed to show that it
exercised due diligence on the supervision and discipline
over its employees. In fact, on the day of the accident,
petitioner Del Rosario was driving without a license. He was
holding a TVR for reckless driving. He testified that he
reported the incident to his superior, but nothing was done
about it. He was not suspended or reprimanded.15 No
disciplinary action whatsoever was taken against petitioner
Del Rosario. We therefore affirm the finding that petitioner
Mercury Drug has failed to discharge its burden of proving
that it exercised due diligence in the selection and
supervision of its employee, petitioner Del Rosario.
We now consider the damages which respondents should
recover from the petitioners.
The trial court awarded the following amounts:
1. Two Million Nine Hundred Seventy-Three Thousand
Pesos (₱2,973,000.00) actual damages;
2. As compensatory damages:
a. Twenty-Three Million Four Hundred Sixty One
Thousand, and Sixty-Two Pesos (₱23,461,062.00) for life
care cost of Stephen;
b. Ten Million Pesos (₱10,000,000.00) as and for lost or
impaired earning capacity of Stephen;
23
3. Four Million Pesos (₱4,000,000.00) as moral damages;
4. Two Million Pesos (₱2,000,000.00) as exemplary
damages; and
5. One Million Pesos (₱1,000,000.00) as attorney’s fees and
litigation expense.
The Court of Appeals affirmed the decision of the trial court
but reduced the award of moral damages to ₱1,000,000.00.
With regard to actual damages, Art. 2199 of the Civil Code
provides that "[E]xcept as provided by law or by stipulation
one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved x x x."
In the instant case, we uphold the finding that the actual
damages claimed by respondents were supported by
receipts. The amount of ₱2,973,000.00 represented cost of
hospital expenses, medicines, medical services and supplies,
and nursing care services provided respondent Stephen
from December 20, 1996, the day of the accident, until
December 1998.
Petitioners are also liable for all damages which are the
natural and probable consequences of the act or omission
complained of.16 The doctors who attended to respondent
Stephen are one in their prognosis that his chances of
walking again and performing basic body functions are nil.
For the rest of his life, he will need continuous rehabilitation
and therapy to prevent further complications such as
pneumonia, bladder and rectum
infection, renal failure, sepsis and severe bed sores,
osteoporosis and fractures, and other spinal cord injury-
related conditions. He will be completely dependent on the
care and support of his family. We thus affirm the award of
₱23,461,062.00 for the life care cost of respondent Stephen
Huang, based on his average monthly expense and the
actuarial computation of the remaining years that he is
expected to live; and the conservative amount of
₱10,000,000.00, as reduced by the trial court, for the loss
or impairment of his earning capacity,17 considering his age,
probable life expectancy, the state of his health, and his
mental and physical condition before the accident. He was
only seventeen years old, nearly six feet tall and weighed 175
pounds. He was in fourth year high school, and a member of
the school varsity basketball team. He was also class
president and editor-in-chief of the school annual. He had
shown very good leadership qualities. He was looking
forward to his college life, having just passed the entrance
examinations of the University of the Philippines, De La
Salle University, and the University of Asia and the Pacific.
The University of Sto. Tomas even offered him a chance to
obtain an athletic scholarship, but the accident prevented

him from attending the basketball try-outs. Without doubt,
he was an exceptional student. He excelled both in his
academics and extracurricular undertakings. He is
intelligent and motivated, a go-getter, as testified by
Francisco Lopez, respondent Stephen Huang’s godfather
and a bank executive.18 Had the accident not happened, he
had a rosy future ahead of him. He wanted to embark on a
banking career, get married and raise children. Taking into
account his outstanding abilities, he would have enjoyed a
successful professional career in banking. But, as Mr. Lopez
stated, it is highly unlikely for someone like respondent to
ever secure a job in a bank. To his knowledge, no bank has
ever hired a person suffering with
the kind of disability as Stephen Huang’s.19
We likewise uphold the award of moral and exemplary
damages and attorney’s fees.
"The award of moral damages is aimed at a restoration,
within the limits of the possible, of the spiritual status quo
ante."20 Moral damages are designed to compensate and
alleviate in some way the physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury
unjustly caused a person. Although incapable of pecuniary
computation, they must be proportionate to the suffering
inflicted.21 The amount of the award bears no relation
whatsoever with the wealth or means of the offender.
In the instant case, respondent Stephen Huang and
respondent spouses Richard and Carmen Huang testified to
the intense suffering they continue to experience as a result
of the accident. Stephen recounted the nightmares and
traumas he suffers almost every night when he relives the
accident. He also gets depression when he thinks of his
bleak future. He feels frustration and embarrassment in
needing to be helped with almost everything and in his
inability to do simple things he used to do. Similarly,
respondent spouses and the rest of the family undergo their
own private suffering. They live with the day-to-day
uncertainty of respondent Stephen Huang’s condition. They
know that the chance of full recovery is nil. Moreover,
respondent Stephen Huang’s paralysis has made him prone
to many other illnesses. His family, especially respondent
spouses, have to make themselves available for Stephen
twenty-four hours a day. They have patterned their daily life
around taking care of him, ministering to his daily needs,
altering the lifestyle to which they had been accustomed.
Respondent Carmen Huang’s brother testified on the
insensitivity of petitioner Mercury Drug towards the plight
of respondent. Stephen, viz.:
Maybe words cannot describe the anger that we feel towards
the defendants. All the time that we were going through the
crisis, there was none (sic) a single sign of nor offer of help,
any consolation or anything whatsoever. It is funny because,
you know, I have many colleagues, business associates,
people even as far as United States, Japan, that I probably
met only once, when they found out, they make a call, they
sent card, they write small notes, but from the defendant,
absolute silence. They didn’t care, and worst, you know, this
is a company that have (sic) all the resources to help us.
They were (sic) on our part, it was doubly painful because
we have no choice but to go back to them and buy the
medicines that we need for Stephen. So, I don’t know how
someone will really have no sense of decency at all to at least
find out what happened to my son, what is his condition, or
if there is anything that they can do to help us.22
On the matter of exemplary damages, Art. 2231 of the Civil
Code provides that in cases of quasi-delicts, exemplary
damages may be granted if the defendant acted with gross
negligence. The records show that at the time of the
accident, petitioner Del Rosario was driving without a
license because he was previously ticketed for reckless
driving. The evidence also shows that he failed to step on his
brakes immediately after the impact. Had petitioner Del
Rosario done so, the injuries which respondent Stephen
sustained could have been greatly reduced. Wanton acts
such as that committed by petitioner Del Rosario need be
suppressed; and employers like petitioner Mercury Drug
should be more circumspect in the observance of due
diligence in the selection and supervision of their
employees. The award of exemplary damages in favor of the
respondents is therefore justified.
With the award of exemplary damages, we also affirm the
grant of attorney’s fees to respondents.23 In addition,
attorney’s fees may be granted when a party is compelled to
litigate or incur expenses to protect his interest by reason of
an unjustified act of the other party.24
Cost against petitioners.
IN VIEW THEREOF, the petition is DENIED. The Decision
and Resolution of the Court of Appeals dated February 16,
2006 and March 30, 2006, respectively, in CA-G.R. CV No.
83981, are AFFIRMED.
24
SO ORDERED.
SECOND DIVISION
G.R. No. 164012 June 8, 2007
FLORDELIZA MENDOZA, petitioner,
vs. MUTYA SORIANO and Minor JULIE ANN
SORIANO duly represented by her natural mother
and guardian ad litem MUTYA
SORIANO, respondents.
DECISION
QUISUMBING, J.:
In this petition for review under Rule 45 of the Rules of
Court, petitioner asks this Court to reverse and set aside the
Decision1 dated November 17, 2003 and the
Resolution2 dated May 24, 2004 of the Court of Appeals in
CA-G.R. CV No. 69037. The appellate court found
petitioner, as employer of Lomer Macasasa, liable for
damages.
The facts are as follows:
At around 1:00 a.m., July 14, 1997, Sonny Soriano, while
crossing Commonwealth Avenue near Luzon Avenue in
Quezon City, was hit by a speeding Tamaraw FX driven by
Lomer Macasasa. Soriano was thrown five meters away,
while the vehicle only stopped some 25 meters from the
point of impact. Gerard Villaspin, one of Soriano’s
companions, asked Macasasa to bring Soriano to the
hospital, but after checking out the scene of the incident,
Macasasa returned to the FX, only to flee. A school bus
brought Soriano to East Avenue Medical Center where he
later died. Subsequently, the Quezon City Prosecutor
recommended the filing of a criminal case for reckless
imprudence resulting to homicide against Macasasa.3
On August 20, 1997, respondents Mutya Soriano and Julie
Ann Soriano, Soriano’s wife and daughter, respectively, filed
a complaint for damages against Macasasa and petitioner
Flordeliza Mendoza, the registered owner of the vehicle. The
complaint was docketed as Civil Case No. C-18038 in the
Regional Trial Court of Caloocan City, Branch 121.
Respondents prayed that Macasasa and petitioner be
ordered to pay them: ₱200,000 moral damages; ₱500,000
for lost income; ₱22,250 for funeral services; ₱45,000 for
burial lot; ₱15,150 for interment and lapida; ₱8,066 for
hospitalization, other medical and transportation expenses;
₱28,540 for food and drinks during the wake; ₱50,000
exemplary damages; ₱60,000 indemnity for Soriano’s
death; and ₱25,000 for attorney’s fees plus ₱500 per court
appearance.4

In her answer, petitioner Mendoza maintained that she was
not liable since as owner of the vehicle, she had exercised
the diligence of a good father of a family over her employee,
Macasasa.
Upon respondents’ motion, the complaint for damages
against Macasasa was dismissed.
After trial, the trial court also dismissed the complaint
against petitioner.5 It found Soriano negligent for crossing
Commonwealth Avenue by using a small gap in the island’s
fencing rather than the pedestrian overpass. The lower court
also ruled that petitioner was not negligent in the selection
and supervision of Macasasa since complainants presented
no evidence to support their allegation of petitioner’s
negligence.6
Respondents appealed. The Court of Appeals reversed the
trial court. The dispositive portion of the appellate court’s
decision reads:
WHEREFORE, the judgment appealed from is REVERSED,
and another one is hereby rendered ordering [petitioner]
Flordeliza Mendoza to pay [respondents] Mutya Soriano
and Julie Ann Soriano the following amounts:
1. Hospital and Burial Expenses ₱80,926.25
2. Loss of earning capacity ₱77,000.00
3. Moral Damages ₱20,000.00
4. Indemnity for the death of Sonny Soriano ₱50,000.00
Actual payment of the aforementioned amounts should,
however, be reduced by twenty (20%) per cent due to the
presence of contributory negligence by the victim as
provided for in Article 2179 of the Civil Code.
SO ORDERED.7
While the appellate court agreed that Soriano was negligent,
it also found Macasasa negligent for speeding, such that he
was unable to avoid hitting the victim. It observed that
Soriano’s own negligence did not preclude recovery of
damages from Macasasa’s negligence. It further held that
since petitioner failed to present evidence to the contrary,
and conformably with Article 21808 of the Civil Code, the
presumption of negligence of the employer in the selection
and supervision of employees stood.
Petitioner’s motion for reconsideration was denied by the
appellate court in a Resolution9 dated May 24, 2004.
Hence, this appeal where petitioner alleges that:
I.THE TOTAL AMOUNT PRAYED FOR IN THE
COMPLAINT IS NOT WITHIN THE JURISDICTION OF
THE REGIONAL TRIAL COURT.
II. [COROLLARILY], THE AWARD OF DAMAGES IN
FAVOR OF THE RESPONDENTS [HAS] NO BASIS IN
LAW.10
The issues are simple: (1) Did the Regional Trial Court have
jurisdiction to try the case? and (2) Was there sufficient
legal basis to award damages?
Petitioner argues that the amount claimed by respondents is
within the jurisdiction of the Metropolitan Trial Court. She
posits that to determine the jurisdictional amount, what
should only be considered are the following: ₱22,250 for
funeral services; ₱45,000 for burial lot; ₱15,150 for
interment and lapida; ₱8,066 for hospitalization and
transportation; ₱28,540 for food and drinks during the
wake; and ₱60,000 indemnity for Soriano’s death. She
maintains that the sum of these amounts, ₱179,006, is
below the jurisdictional amount of the Regional Trial Court.
She states that under Section 19(8) of the Judiciary
Reorganization Act of 1980, the following claims of
respondents must be excluded: ₱200,000 moral damages,
₱500,000 for lost income; ₱50,000 exemplary damages;
₱25,000 attorney’s fees plus ₱500 per court appearance.
Petitioner thus prays that the decision of the Court of
Appeals be reversed, and the dismissal of the case by the
trial court be affirmed on the ground of lack of jurisdiction.
Section 19(8) of Batas Pambansa Blg. 129,11 as amended by
Republic Act No. 7691, states the pertinent law.
SEC. 19. Jurisdiction in civil cases.–Regional Trial Courts
shall exercise exclusive original jurisdiction: x x x x
(8) In all other cases in which the demand, exclusive of
interest, damages of whatever kind, attorney's fees,
litigation expenses, and costs or the value of the property in
controversy exceeds One hundred thousand pesos
(₱100,000.00) or, in such other cases in Metro Manila,
where the demand, exclusive of the abovementioned items
exceeds Two hundred thousand pesos (₱200,000.00).
But relatedly, Administrative Circular No. 09-9412 expressly
states: x x x x
25
2. The exclusion of the term "damages of whatever kind" in
determining the jurisdictional amount under Section 19(8)
and Section 33(1) of BP Blg. 129, as amended by RA No.
7691, applies to cases where the damages are merely
incidental to or a consequence of the main cause of
action. However, in cases where the claim for damages is the
main cause of action, or one of the causes of action, the
amount of such claim shall be considered in determining the
jurisdiction of the court. (Underscoring supplied.)
Actions for damages based on quasi-delicts, as in this case,
are primarily and effectively actions for the recovery of a
sum of money for the damages for tortious acts.13 In this
case, respondents’ claim of ₱929,006 in damages and
₱25,000 attorney’s fees plus ₱500 per court appearance
represents the monetary equivalent for compensation of the
alleged injury. These money claims are the principal reliefs
sought by respondents in their complaint for
damages.14 Consequently then, we hold that the Regional
Trial Court of Caloocan City possessed and properly
exercised jurisdiction over the case.15
Petitioner further argues that since respondents caused the
dismissal of the complaint against Macasasa, there is no
longer any basis to find her liable. She claims that "no iota
of evidence" was presented in this case to prove Macasasa’s
negligence, and besides, respondents can recover damages
in the criminal case against him.
Respondents counter that as Macasasa’s employer,
petitioner was presumed negligent in selecting and
supervising Macasasa after he was found negligent by the
Court of Appeals.
The records show that Macasasa violated two traffic rules
under the Land Transportation and Traffic Code. First, he
failed to maintain a safe speed to avoid endangering
lives.16 Both the trial and the appellate courts found
Macasasa overspeeding.17 The records show also that
Soriano was thrown five meters away after he was
hit.18 Moreover, the vehicle stopped only some 25 meters
from the point of impact.19
Both circumstances support the conclusion that the FX
vehicle driven by Macasasa was overspeeding. Second,
Macasasa, the vehicle driver, did not aid Soriano, the
accident victim, in violation of Section 55,20 Article V of the
Land Transportation and Traffic Code. While Macasasa at
first agreed to bring Soriano to the hospital, he fled the
scene in a hurry. Contrary to petitioner’s claim, there is no

showing of any factual basis that Macasasa fled for fear of
the people’s wrath. What remains undisputed is that he did
not report the accident to a police officer, nor did he
summon a doctor. Under Article 218521 of the Civil Code, a
person driving a motor vehicle is presumed negligent if at
the time of the mishap, he was violating traffic regulations.
While respondents could recover damages from Macasasa in
a criminal case and petitioner could become subsidiarily
liable, still petitioner, as owner and employer, is directly and
separately civilly liable for her failure to exercise due
diligence in supervising Macasasa.22 We must emphasize
that this damage suit is for the quasi-delict of petitioner, as
owner and employer, and not for the delict of Macasasa, as
driver and employee.
Under Article 2180 of the Civil Code, employers are liable
for the damages caused by their employees acting within the
scope of their assigned tasks. The liability arises due to the
presumed negligence of the employers in supervising their
employees unless they prove that they observed all the
diligence of a good father of a family to prevent the damage.
In this case, we hold petitioner primarily and solidarily
liable for the damages caused by Macasasa.23 Respondents
could recover directly from petitioner24 since petitioner
failed to prove that she exercised the diligence of a good
father of a family in supervising Macasasa.25 Indeed, it is
unfortunate that petitioner harbored the notion that the
Regional Trial Court did not have jurisdiction over the case
and opted not to present her evidence on this point.
Lastly, we agree that the Court of Appeals did not err in
ruling that Soriano was guilty of contributory negligence for
not using the pedestrian overpass while crossing
Commonwealth Avenue. We even note that the respondents
now admit this point, and concede that the appellate court
had properly reduced by 20% the amount of damages it
awarded. Hence, we affirm the reduction26 of the amount
earlier awarded, based on Article 2179 of the Civil Code
which reads:
When the plaintiff's own negligence was the immediate and
proximate cause of his injury, he cannot recover damages.
But if his negligence was only contributory, the immediate
and proximate cause of the injury being the defendant's lack
of due care, the plaintiff may recover damages, but the
courts shall mitigate the damages to be awarded.
WHEREFORE, we DENY the petition for lack of merit
and hereby AFFIRM the Decision dated November 17,
2003 and the Resolution dated May 24, 2004 of the Court of
Appeals in CA-G.R. CV No. 69037.
Costs against petitioner.
SO ORDERED.
FIRST DIVISION
G.R. No. 141538 March 23, 2004
HERMANA R. CEREZO, petitioner,
vs. DAVID TUAZON, respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1 to annul the
Resolution2 dated 21 October 1999 of the Court of Appeals
in CA-G.R. SP No. 53572, as well as its Resolution dated 20
January 2000 denying the motion for reconsideration. The
Court of Appeals denied the petition for annulment of the
Decision3 dated 30 May 1995 rendered by the Regional Trial
Court of Angeles City, Branch 56 ("trial court"), in Civil Case
No. 7415. The trial court ordered petitioner Hermana R.
Cerezo ("Mrs. Cerezo") to pay respondent David Tuazon
("Tuazon") actual damages, loss of earnings, moral
damages, and costs of suit.
Antecedent Facts
Around noontime of 26 June 1993, a Country Bus Lines
passenger bus with plate number NYA 241 collided with a
tricycle bearing plate number TC RV 126 along Captain M.
Palo Street, Sta. Ines, Mabalacat, Pampanga. On 1 October
1993, tricycle driver Tuazon filed a complaint for damages
against Mrs. Cerezo, as owner of the bus line, her husband
Attorney Juan Cerezo ("Atty. Cerezo"), and bus driver
Danilo A. Foronda ("Foronda"). The complaint alleged that:
7. At the time of the incident, plaintiff [Tuazon] was in his
proper lane when the second-named defendant [Foronda],
being then the driver and person in charge of the Country
Bus with plate number NYA 241, did then and there
willfully, unlawfully, and feloniously operate the said motor
vehicle in a negligent, careless, and imprudent manner
without due regard to traffic rules and regulations, there
being a "Slow Down" sign near the scene of the incident, and
without taking the necessary precaution to prevent loss of
lives or injuries, his negligence, carelessness and
imprudence resulted to severe damage to the tricycle and
serious physical injuries to plaintiff thus making him unable
to walk and becoming disabled, with his thumb and middle
finger on the left hand being cut[.]4
On 1 October 1993, Tuazon filed a motion to litigate as a
pauper. Subsequently, the trial court issued summons
against Atty. Cerezo and Mrs. Cerezo ("the Cerezo spouses")
26
at the Makati address stated in the complaint. However, the
summons was returned unserved on 10 November 1993 as
the Cerezo spouses no longer held office nor resided in
Makati. On 18 April 1994, the trial court issued alias
summons against the Cerezo spouses at their address in
Barangay Sta. Maria, Camiling, Tarlac. The alias summons
and a copy of the complaint were finally served on 20 April
1994 at the office of Atty. Cerezo, who was then working as
Tarlac Provincial Prosecutor. Atty. Cerezo reacted angrily on
learning of the service of summons upon his person. Atty.
Cerezo allegedly told Sheriff William Canlas: "Punyeta, ano
ang gusto mong mangyari? Gusto mong hindi ka
makalabas ng buhay dito? Teritoryo ko ito. Wala ka sa
teritoryo mo."5
The records show that the Cerezo spouses participated in
the proceedings before the trial court. The Cerezo spouses
filed a comment with motion for bill of particulars dated 29
April 1994 and a reply to opposition to comment with
motion dated 13 June 1994.6 On 1 August 1994, the trial
court issued an order directing the Cerezo spouses to file a
comment to the opposition to the bill of particulars. Atty.
Elpidio B. Valera ("Atty. Valera") of Valera and Valera Law
Offices appeared on behalf of the Cerezo spouses. On 29
August 1994, Atty. Valera filed an urgent ex-parte motion
praying for the resolution of Tuazon’s motion to litigate as a
pauper and for the issuance of new summons on the Cerezo
spouses to satisfy proper service in accordance with the
Rules of Court.7
On 30 August 1994, the trial court issued an order resolving
Tuazon’s motion to litigate as a pauper and the Cerezo
spouses’ urgent ex-parte motion. The order reads:
At the hearing on August 30, 1994, the plaintiff [Tuazon]
testified that he is presently jobless; that at the time of the
filing of this case, his son who is working in Malaysia helps
him and sends him once in a while P300.00 a month, and
that he does not have any real property. Attached to the
Motion to Litigate as Pauper are his Affidavit that he is
unemployed; a Certification by the Barangay Captain of his
poblacion that his income is not enough for his family’s
subsistence; and a Certification by the Office of the
Municipal Assessor that he has no landholding in the
Municipality of Mabalacat, Province of Pampanga.
The Court is satisfied from the unrebutted testimony of the
plaintiff that he is entitled to prosecute his complaint in this
case as a pauper under existing rules.

On the other hand, the Court denies the prayer in the
Appearance and Urgent Ex-Parte Motion requiring new
summons to be served to the defendants. The Court is of the
opinion that any infirmity in the service of the summons to
the defendant before plaintiff was allowed to prosecute his
complaint in this case as a pauper has been cured by this
Order.
If within 15 days from receipt of this Order, the defendants
do not question on appeal this Order of this Court, the Court
shall proceed to resolve the Motion for Bill of Particulars.8
On 27 September 1994, the Cerezo spouses filed an urgent
ex-parte motion for reconsideration. The trial court denied
the motion for reconsideration.
On 14 November 1994, the trial court issued an order
directing the Cerezo spouses to file their answer within
fifteen days from receipt of the order. The Cerezo spouses
did not file an answer. On 27 January 1995, Tuazon filed a
motion to declare the Cerezo spouses in default. On 6
February 1995, the trial court issued an order declaring the
Cerezo spouses in default and authorizing Tuazon to present
his evidence. 9
On 30 May 1995, after considering Tuazon’s testimonial and
documentary evidence, the trial court ruled in Tuazon’s
favor. The trial court made no pronouncement on Foronda’s
liability because there was no service of summons on him.
The trial court did not hold Atty. Cerezo liable as Tuazon
failed to show that Mrs. Cerezo’s business benefited the
family, pursuant to Article 121(3) of the Family Code. The
trial court held Mrs. Cerezo solely liable for the damages
sustained by Tuazon arising from the negligence of Mrs.
Cerezo’s employee, pursuant to Article 2180 of the Civil
Code. The dispositive portion of the trial court’s decision
reads:
WHEREFORE, judgment is hereby rendered ordering the
defendant Hermana Cerezo to pay the plaintiff:
a) For Actual - P69,485.35
Damages
1) Expenses for
operation and
medical Treatment
2) Cost of repair of
the tricycle
b) For loss of - 39,921.00
earnings
c) For moral damages - 43,300.00
d) And to pay the cost - 20,000.00
of the suit.
The docket fees and other expenses in the filing of this suit
shall be lien on whatever judgment may be rendered in
favor of the plaintiff.
SO ORDERED.10
Mrs. Cerezo received a copy of the decision on 25 June 1995.
On 10 July 1995, Mrs. Cerezo filed before the trial court a
petition for relief from judgment on the grounds of "fraud,
mistake or excusable negligence." Testifying before the trial
court, both Mrs. Cerezo and Atty. Valera denied receipt of
notices of hearings and of orders of the court. Atty. Valera
added that he received no notice before or during the 8 May
1995 elections, "when he was a senatorial candidate for the
KBL Party, and very busy, using his office and residence as
Party National Headquarters." Atty. Valera claimed that he
was able to read the decision of the trial court only after
Mrs. Cerezo sent him a copy.11
Tuazon did not testify but presented documentary evidence
to prove the participation of the Cerezo spouses in the case.
Tuazon presented the following exhibits:
Exhibit 1 - Sheriff’s return and summons;
Exhibit 1-A - Alias summons dated April 20, 1994;
Exhibit 2 - Comment with Motion;
Exhibit 3 - Minutes of the hearing held on August 1,
1994;
Exhibit 3-A - Signature of defendant’s counsel;
Exhibit 4 - Minutes of the hearing held on August 30,
1994;
Exhibit 4-A - Signature of the defendant’s counsel;
Exhibit 5 - Appearance and Urgent Ex-Parte Motion;
Exhibit 6 - Order dated November 14, 1994;
Exhibit 6-A - Postal certification dated January 13,
1995;
Exhibit 7 - Order dated February [illegible];
Exhibit 7-A - Court’s return slip addressed to Atty.
Elpidio Valera;
Exhibit 7-B - Court’s return slip addressed to Spouses
Juan and Hermana Cerezo;
Exhibit 8 - Decision dated May [30], 1995
Exhibit 8-A - Court’s return slip addressed to defendant
Hermana Cerezo;
27
Exhibit 8-B - Court’s return slip addressed to
defendant’s counsel, Atty. Elpidio Valera;
Exhibit 9 - Order dated September 21, 1995;
Exhibit 9-A - Second Page of Exhibit 9;
Exhibit 9-B - Third page of Exhibit 9;
Exhibit 9-C - Fourth page of Exhibit 9;
Exhibit 9-D - Court’s return slip addressed to Atty.
Elpidio Valera;
and
Exhibit 9-E - Court’s return slip addressed to plaintiff’s
counsel, Atty. Norman Dick de Guzman.12
On 4 March 1998, the trial court issued an order13 denying
the petition for relief from judgment. The trial court stated
that having received the decision on 25 June 1995, the
Cerezo spouses should have filed a notice of appeal instead
of resorting to a petition for relief from judgment. The trial
court refused to grant relief from judgment because the
Cerezo spouses could have availed of the remedy of appeal.
Moreover, the Cerezo spouses not only failed to prove fraud,
accident, mistake or excusable negligence by conclusive
evidence, they also failed to prove that they had a good and
substantial defense. The trial court noted that the Cerezo
spouses failed to appeal because they relied on an expected
settlement of the case.
The Cerezo spouses subsequently filed before the Court of
Appeals a petition for certiorari under Section 1 of Rule 65.
The petition was docketed as CA-G.R. SP No. 48132.14 The
petition questioned whether the trial court acquired
jurisdiction over the case considering there was no service
of summons on Foronda, whom the Cerezo spouses claimed
was an indispensable party. In a resolution15 dated 21
January 1999, the Court of Appeals denied the petition
for certiorari and affirmed the trial court’s order denying
the petition for relief from judgment. The Court of Appeals
declared that the Cerezo spouses’ failure to file an answer
was due to their own negligence, considering that they
continued to participate in the proceedings without filing an
answer. There was also nothing in the records to show that
the Cerezo spouses actually offered a reasonable settlement
to Tuazon. The Court of Appeals also denied Cerezo spouses’
motion for reconsideration for lack of merit.
The Cerezo spouses filed before this Court a petition for
review on certiorari under Rule 45. Atty. Cerezo himself
signed the petition, docketed as G.R. No. 137593. On 13
April 1999, this Court rendered a resolution denying the
petition for review on certiorari for failure to attach an
affidavit of service of copies of the petition to the Court of

Appeals and to the adverse parties. Even if the petition
complied with this requirement, the Court would still have
denied the petition as the Cerezo spouses failed to show that
the Court of Appeals committed a reversible error. The
Court’s resolution was entered in the Book of Entries and
Judgments when it became final and executory on 28 June
1999.16
Undaunted, the Cerezo spouses filed before the Court of
Appeals on 6 July 1999 a petition for annulment of
judgment under Rule 47 with prayer for restraining order.
Atty. Valera and Atty. Dionisio S. Daga ("Atty. Daga")
represented Mrs. Cerezo in the petition, docketed as CA-
G.R. SP No. 53572.17 The petition prayed for the annulment
of the 30 May 1995 decision of the trial court and for the
issuance of a writ of preliminary injunction enjoining
execution of the trial court’s decision pending resolution of
the petition.
The Court of Appeals denied the petition for annulment of
judgment in a resolution dated 21 October 1999. The
resolution reads in part:
In this case, records show that the petitioner previously filed
with the lower court a Petition for Relief from Judgment on
the ground that they were wrongfully declared in default
while waiting for an amicable settlement of the complaint
for damages. The court a quo correctly ruled that such
petition is without merit. The defendant spouses admit that
during the initial hearing they appeared before the court
and even mentioned the need for an amicable settlement.
Thus, the lower court acquired jurisdiction over the
defendant spouses.
Therefore, petitioner having availed of a petition for relief,
the remedy of an annulment of judgment is no longer
available. The proper action for the petitioner is to appeal
the order of the lower court denying the petition for relief.
Wherefore, the instant petition could not be given due
course and should accordingly be dismissed.
SO ORDERED.18
On 20 January 2000, the Court of Appeals denied the
Cerezo spouses’ motion for reconsideration.19 The Court of
Appeals stated:
A distinction should be made between a court’s jurisdiction
over a person and its jurisdiction over the subject matter of
a case. The former is acquired by the proper service of
summons or by the parties’ voluntary appearance; while
the latter is conferred by law.
Resolving the matter of jurisdiction over the subject
matter, Section 19(1) of B[atas] P[ambansa] 129 provides
that Regional Trial Courts shall exercise exclusive original
jurisdiction in all civil actions in which the subject of the
litigation is incapable of pecuniary estimation. Thus it was
proper for the lower court to decide the instant case for
damages.
Unlike jurisdiction over the subject matter of a case which
is absolute and conferred by law; any defects [sic] in the
acquisition of jurisdiction over a person (i.e., improper
filing of civil complaint or improper service of summons)
may be waived by the voluntary appearance of parties.
The lower court admits the fact that no summons was
served on defendant Foronda. Thus, jurisdiction over the
person of defendant Foronda was not acquired, for which
reason he was not held liable in this case. However, it has
been proven that jurisdiction over the other defendants
was validly acquired by the court a quo.
The defendant spouses admit to having appeared in the
initial hearings and in the hearing for plaintiff’s motion to
litigate as a pauper. They even mentioned conferences
where attempts were made to reach an amicable settlement
with plaintiff. However, the possibility of amicable
settlement is not a good and substantial defense which will
warrant the granting of said petition. x x x
Assuming arguendo that private respondent failed to
reserve his right to institute a separate action for damages
in the criminal action, the petitioner cannot now raise such
issue and question the lower court’s jurisdiction because
petitioner and her husband have waived such right by
voluntarily appearing in the civil case for damages.
Therefore, the findings and the decision of the lower court
may bind them.
Records show that the petitioner previously filed with the
lower court a Petition for Relief from Judgment on the
ground that they were wrongfully declared in default while
waiting for an amicable settlement of the complaint for
damages. The court a quo correctly ruled that such petition
is without merit, jurisdiction having been acquired by the
voluntary appearance of defendant spouses.
28
Once again, it bears stressing that having availed of a
petition for relief, the remedy of annulment of judgment is
no longer available.
Based on the foregoing, the motion for reconsideration
could not be given due course and is hereby DENIED.
SO ORDERED.20
The Issues
On 7 February 2000, Mrs. Cerezo, this time with Atty. Daga
alone representing her, filed the present petition for review
on certiorari before this Court. Mrs. Cerezo claims that:
1. In dismissing the Petition for Annulment of Judgment,
the Court of Appeals assumes that the issues raised in the
petition for annulment is based on extrinsic fraud related to
the denied petition for relief notwithstanding that the
grounds relied upon involves questions of lack of
jurisdiction.
2. In dismissing the Petition for Annulment, the Court of
Appeals disregarded the allegation that the lower court[’s]
findings of negligence against defendant-driver Danilo
Foronda [whom] the lower court did not summon is null
and void for want of due process and consequently, such
findings of negligence which is [sic] null and void cannot
become the basis of the lower court to adjudge petitioner-
employer liable for civil damages.
3. In dismissing the Petition for Annulment, the Court of
Appeals ignored the allegation that defendant-driver Danilo
A. Foronda whose negligence is the main issue is an
indispensable party whose presence is compulsory but
[whom] the lower court did not summon.
4. In dismissing the Petition for Annulment, the Court of
Appeals ruled that assuming arguendo that private
respondent failed to reserve his right to institute a separate
action for damages in the criminal action, the petitioner
cannot now raise such issue and question the lower court’s
jurisdiction because petitioner [has] waived such right by
voluntarily appearing in the civil case for damages
notwithstanding that lack of jurisdiction cannot be waived.21
The Court’s Ruling
The petition has no merit. As the issues are interrelated, we
shall discuss them jointly.

Remedies Available to a Party Declared in Default
An examination of the records of the entire proceedings
shows that three lawyers filed and signed pleadings on
behalf of Mrs. Cerezo, namely, Atty. Daga, Atty. Valera, and
Atty. Cerezo. Despite their number, Mrs. Cerezo’s counsels
failed to avail of the proper remedies. It is either by sheer
ignorance or by malicious manipulation of legal
technicalities that they have managed to delay the
disposition of the present case, to the detriment of pauper
litigant Tuazon.
Mrs. Cerezo claims she did not receive any copy of the order
declaring the Cerezo spouses in default. Mrs. Cerezo asserts
that she only came to know of the default order on 25 June
1995, when she received a copy of the decision. On 10 July
1995, Mrs. Cerezo filed before the trial court a petition for
relief from judgment under Rule 38, alleging "fraud,
mistake, or excusable negligence" as grounds. On 4 March
1998, the trial court denied Mrs. Cerezo’s petition for relief
from judgment. The trial court stated that Mrs. Cerezo could
have availed of appeal as a remedy and that she failed to
prove that the judgment was entered through fraud,
accident, mistake, or excusable negligence. Mrs. Cerezo then
filed before the Court of Appeals a petition
for certiorari under Section 1 of Rule 65 assailing the denial
of the petition for relief from judgment. On 21 January
1999, the Court of Appeals dismissed Mrs. Cerezo’s petition.
On 24 February 1999, the appellate court denied Mrs.
Cerezo’s motion for reconsideration. On 11 March 1999,
Mrs. Cerezo filed before this Court a petition for review
on certiorari under Rule 45, questioning the denial of the
petition for relief from judgment. We denied the petition
and our resolution became final and executory on 28 June
1999.
On 6 July 1999, a mere eight days after our resolution
became final and executory, Mrs. Cerezo filed before the
Court of Appeals a petition for annulment of the judgment
of the trial court under Rule 47. Meanwhile, on 25 August
1999, the trial court issued over the objection of Mrs. Cerezo
an order of execution of the judgment in Civil Case No. 7415.
On 21 October 1999, the Court of Appeals dismissed the
petition for annulment of judgment. On 20 January 2000,
the Court of Appeals denied Mrs. Cerezo’s motion for
reconsideration. On 7 February 2000, Mrs. Cerezo filed the
present petition for review on certiorari under Rule 45
challenging the dismissal of her petition for annulment of
judgment.
Lina v. Court of Appeals22 enumerates the remedies
available to a party declared in default:
a) The defendant in default may, at any time after discovery
thereof and before judgment, file a motion under oath to
set aside the order of default on the ground that his
failure to answer was due to fraud, accident, mistake or
excusable negligence, and that he has a meritorious defense
(Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]);
b) If the judgment has already been rendered when the
defendant discovered the default, but before the same has
become final and executory, he may file a motion for new
trial under Section 1 (a) of Rule 37;
c) If the defendant discovered the default after the judgment
has become final and executory, he may file a petition for
relief under Section 2 [now Section 1] of Rule 38; and
d) He may also appeal from the judgment rendered against
him as contrary to the evidence or to the law, even if no
petition to set aside the order of default has been presented
by him (Sec. 2, Rule 41). (Emphasis added)
Moreover, a petition for certiorari to declare the nullity of a
judgment by default is also available if the trial court
improperly declared a party in default, or even if the trial
court properly declared a party in default, if grave abuse of
discretion attended such declaration.23
Mrs. Cerezo admitted that she received a copy of the trial
court’s decision on 25 June 1995. Based on this admission,
Mrs. Cerezo had at least three remedies at her disposal: an
appeal, a motion for new trial, or a petition for certiorari.
Mrs. Cerezo could have appealed under Rule 4124 from the
default judgment within 15 days from notice of the
judgment. She could have availed of the power of the Court
of Appeals to try cases and conduct hearings, receive
evidence, and perform all acts necessary to resolve factual
issues raised in cases falling within its appellate
jurisdiction.25
Mrs. Cerezo also had the option to file under Rule 3726 a
motion for new trial within the period for taking an appeal.
If the trial court grants a new trial, the original judgment is
vacated, and the action will stand for trial de novo. The
recorded evidence taken in the former trial, as far as the
same is material and competent to establish the issues, shall
be used at the new trial without retaking the same.27
29
Mrs. Cerezo also had the alternative of filing under Rule
6528 a petition for certiorari assailing the order of default
within 60 days from notice of the judgment. An order of
default is interlocutory, and an aggrieved party may file an
appropriate special civil action under Rule 65.29 In a petition
for certiorari, the appellate court may declare void both the
order of default and the judgment of default.
Clearly, Mrs. Cerezo had every opportunity to avail of these
remedies within the reglementary periods provided under
the Rules of Court. However, Mrs. Cerezo opted to file a
petition for relief from judgment, which is available only in
exceptional cases. A petition for relief from judgment
should be filed within the reglementary period of 60 days
from knowledge of judgment and six months from entry of
judgment, pursuant to
Rule 38 of the Rules of Civil Procedure.30 Tuason v. Court
of Appeals31 explained the nature of a petition for relief
from judgment:
When a party has another remedy available to him, which
may either be a motion for new trial or appeal from an
adverse decision of the trial court, and he was not prevented
by fraud, accident, mistake or excusable negligence from
filing such motion or taking such appeal, he cannot avail
himself of this petition. Indeed, relief will not be granted to
a party who seeks avoidance from the effects of the
judgment when the loss of the remedy at law was due to his
own negligence; otherwise the petition for relief can be used
to revive the right to appeal which has been lost thru
inexcusable negligence.”
Evidently, there was no fraud, accident, mistake, or
excusable negligence that prevented Mrs. Cerezo from filing
an appeal, a motion for new trial or a petition for certiorari.
It was error for her to avail of a petition for relief from
judgment.
After our resolution denying Mrs. Cerezo’s petition for relief
became final and executory, Mrs. Cerezo, in her last ditch
attempt to evade liability, filed before the Court of Appeals a
petition for annulment of the judgment of the trial court.
Annulment is available only on the grounds of extrinsic
fraud and lack of jurisdiction. If based on extrinsic fraud, a
party must file the petition within four years from its
discovery, and if based on lack of jurisdiction, before laches
or estoppel bars the petition. Extrinsic fraud is not a valid
ground if such fraud was used as a ground, or could have

been used as a ground, in a motion for new trial or petition
for relief from judgment.32
Mrs. Cerezo insists that lack of jurisdiction, not extrinsic
fraud, was her ground for filing the petition for annulment
of judgment. However, a party may avail of the remedy of
annulment of judgment under Rule 47 only if the ordinary
remedies of new trial, appeal, petition for relief from
judgment, or other appropriate remedies are no longer
available through no fault of the party.33 Mrs. Cerezo could
have availed of a new trial or appeal but through her own
fault she erroneously availed of the remedy of a petition for
relief, which was denied with finality. Thus, Mrs. Cerezo
may no longer avail of the remedy of annulment.
In any event, the trial court clearly acquired jurisdiction
over Mrs. Cerezo’s person. Mrs. Cerezo actively participated
in the proceedings before the trial court, submitting herself
to the jurisdiction of the trial court. The defense of lack of
jurisdiction fails in light of her active participation in the
trial court proceedings. Estoppel or laches may also bar lack
of jurisdiction as a ground for nullity especially if raised for
the first time on appeal by a party who participated in the
proceedings before the trial court, as what happened in this
case.34
For these reasons, the present petition should be dismissed
for utter lack of merit. The extraordinary action to annul a
final judgment is restricted to the grounds specified in the
rules. The reason for the restriction is to prevent this
extraordinary action from being used by a losing party to
make a complete farce of a duly promulgated decision that
has long become final and executory. There would be no end
to litigation if parties who have unsuccessfully availed of any
of the appropriate remedies or lost them through their fault
could still bring an action for annulment of
judgment.35 Nevertheless, we shall discuss the issues raised
in the present petition to clear any doubt about the
correctness of the decision of the trial court.
Mrs. Cerezo’s Liability and the Trial Court’s
Acquisition of Jurisdiction
Mrs. Cerezo contends that the basis of the present petition
for annulment is lack of jurisdiction. Mrs. Cerezo asserts
that the trial court could not validly render judgment since
it failed to acquire jurisdiction over Foronda. Mrs. Cerezo
points out that there was no service of summons on
Foronda. Moreover, Tuazon failed to reserve his right to
institute a separate civil action for damages in the criminal
action. Such contention betrays a faulty foundation. Mrs.
Cerezo’s contention proceeds from the point of view of
criminal law and not of civil law, while the basis of the
present action of Tuazon is quasi-delict under the Civil
Code, not delict under the Revised Penal Code.
The same negligent act may produce civil liability arising
from a delict under Article 103 of the Revised Penal Code, or
may give rise to an action for a quasi-delict under Article
2180 of the Civil Code. An aggrieved party may choose
between the two remedies. An action based on a quasi-delict
may proceed independently from the criminal
action.36There is, however, a distinction between civil
liability arising from a delict and civil liability arising from a
quasi-delict. The choice of remedy, whether to sue for a
delict or a quasi-delict, affects the procedural and
jurisdictional issues of the action.37
Tuazon chose to file an action for damages based on a quasi-
delict. In his complaint, Tuazon alleged that Mrs. Cerezo,
"without exercising due care and diligence in the
supervision and management of her employees and buses,"
hired Foronda as her driver. Tuazon became disabled
because of Foronda’s "recklessness, gross negligence and
imprudence," aggravated by Mrs. Cerezo’s "lack of due care
and diligence in the selection and supervision of her
employees, particularly Foronda."38
The trial court thus found Mrs. Cerezo liable under Article
2180 of the Civil Code. Article 2180 states in part:
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not
engaged in any business or industry.”
Contrary to Mrs. Cerezo’s assertion, Foronda is not an
indispensable party to the case. An indispensable party is
one whose interest is affected by the court’s action in the
litigation, and without whom no final resolution of the case
is possible.39 However, Mrs. Cerezo’s liability as an employer
in an action for a quasi-delict is not only solidary, it is also
primary and direct. Foronda is not an indispensable party to
the final resolution of Tuazon’s action for damages against
Mrs. Cerezo.
The responsibility of two or more persons who are liable for
a quasi-delict is solidary.40 Where there is a solidary
obligation on the part of debtors, as in this case, each debtor
is liable for the entire obligation. Hence, each debtor is
liable to pay for the entire obligation in full. There is no
merger or renunciation of rights, but only mutual
30
representation.41 Where the obligation of the parties is
solidary, either of the parties is indispensable, and the other
is not even a necessary party because complete relief is
available from either.42 Therefore, jurisdiction over Foronda
is not even necessary as Tuazon may collect damages from
Mrs. Cerezo alone.
Moreover, an employer’s liability based on a quasi-delict is
primary and direct, while the employer’s liability based on a
delict is merely subsidiary.43 The words "primary and
direct," as contrasted with "subsidiary," refer to the remedy
provided by law for enforcing the obligation rather than to
the character and limits of the obligation.44 Although
liability under Article 2180 originates from the negligent act
of the employee, the aggrieved party may sue the employer
directly. When an employee causes damage, the law
presumes that the employer has himself committed an act of
negligence in not preventing or avoiding the damage. This is
the fault that the law condemns. While the employer is
civilly liable in a subsidiary capacity for the employee’s
criminal negligence, the employer is also civilly liable
directly and separately for his own civil negligence in failing
to exercise due diligence in selecting and supervising his
employee. The idea that the employer’s liability is solely
subsidiary is wrong.45
The action can be brought directly against the person
responsible (for another), without including the author of
the act. The action against the principal is accessory in the
sense that it implies the existence of a prejudicial act
committed by the employee, but it is not subsidiary in the
sense that it can not be instituted till after the judgment
against the author of the act or at least, that it is subsidiary
to the principal action; the action for responsibility (of the
employer) is in itself a principal action.46”
Thus, there is no need in this case for the trial court to
acquire jurisdiction over Foronda. The trial court’s
acquisition of jurisdiction over Mrs. Cerezo is sufficient to
dispose of the present case on the merits.
In contrast, an action based on a delict seeks to enforce the
subsidiary liability of the employer for the criminal
negligence of the employee as provided in Article 103 of the
Revised Penal Code. To hold the employer liable in a
subsidiary capacity under a delict, the aggrieved party must
initiate a criminal action where the employee’s delict and
corresponding primary liability are established.47 If the
present action proceeds from a delict, then the trial court’s
jurisdiction over Foronda is necessary. However, the

present action is clearly for the quasi-delict of Mrs. Cerezo
and not for the delict of Foronda.
The Cerezo spouses’ contention that summons be served
anew on them is untenable in light of their participation in
the trial court proceedings. To uphold the Cerezo spouses’
contention would make a fetish of a technicality.48Moreover,
any irregularity in the service of summons that might have
vitiated the trial court’s jurisdiction over the persons of the
Cerezo spouses was deemed waived when the Cerezo
spouses filed a petition for relief from judgment.49
We hold that the trial court had jurisdiction and was
competent to decide the case in favor of Tuazon and against
Mrs. Cerezo even in the absence of Foronda. Contrary to
Mrs. Cerezo’s contention, Foronda is not an indispensable
party to the present case. It is not even necessary for Tuazon
to reserve the filing of a separate civil action because he
opted to file a civil action for damages against Mrs. Cerezo
who is primarily and directly liable for her own civil
negligence. The words of Justice Jorge Bocobo in Barredo
v. Garcia still hold true today as much as it did in 1942:
x x x [T]o hold that there is only one way to make
defendant’s liability effective, and that is, to sue the driver
and exhaust his (the latter’s) property first, would be
tantamount to compelling the plaintiff to follow a devious
and cumbersome method of obtaining relief. True, there is
such a remedy under our laws, but there is also a more
expeditious way, which is based on the primary and direct
responsibility of the defendant under article [2180] of the
Civil Code. Our view of the law is more likely to facilitate
remedy for civil wrongs, because the procedure indicated by
the defendant is wasteful and productive of delay, it being a
matter of common knowledge that professional drivers of
taxis and other similar public conveyances do not have
sufficient means with which to pay damages. Why, then,
should the plaintiff be required in all cases to go through
this roundabout, unnecessary, and probably useless
procedure? In construing the laws, courts have endeavored
to shorten and facilitate the pathways of right and justice.”50
Interest at the rate of 6% per annum is due on the amount
of damages adjudged by the trial court.51 The 6% per
annum interest shall commence from 30 May 1995, the date
of the decision of the trial court. Upon finality of this
decision, interest at 12% per annum, in lieu of 6% per
annum, is due on the amount of damages adjudged by the
trial court until full payment.
WHEREFORE, we DENY the instant petition for review.
The Resolution dated 21 October 1999 of the Court of
Appeals in CA-G.R. SP No. 53572, as well as its Resolution
dated 20 January 2000 denying the motion for
reconsideration, is AFFIRMED with
the MODIFICATION that the amount due shall earn legal
interest at 6% per annum computed from 30 May 1995, the
date of the trial court’s decision. Upon finality of this
decision, the amount due shall earn interest at 12% per
annum, in lieu of 6% per annum, until full payment.
SO ORDERED.
SECOND DIVISION
G.R. No. 174156 June 20, 2012
FILCAR TRANSPORT SERVICES, Petitioner,
vs. JOSE A. ESPINAS, Respondent.
DECISION
BRION, J.:
We resolve the present petition for review on certiorari1 filed
by petitioner Filcar Transport Services (Filcar), challenging
the decision2 and the resolution3 of the Court of Appeals
(CA) in CA-G.R. SP No. 86603.
The facts of the case, gathered from the records, are briefly
summarized below.
On November 22, 1998, at around 6:30 p.m., respondent
Jose A. Espinas was driving his car along Leon Guinto Street
in Manila. Upon reaching the intersection of Leon Guinto
and President Quirino Streets, Espinas stopped his car.
When the signal light turned green, he proceeded to cross
the intersection. He was already in the middle of the
intersection when another car, traversing President Quirino
Street and going to Roxas Boulevard, suddenly hit and
bumped his car. As a result of the impact, Espinas’ car
turned clockwise. The other car escaped from the scene of
the incident, but Espinas was able to get its plate number.
After verifying with the Land Transportation Office, Espinas
learned that the owner of the other car, with plate number
UCF-545, is Filcar.
Espinas sent several letters to Filcar and to its President and
General Manager Carmen Flor, demanding payment for the
damages sustained by his car. On May 31, 2001, Espinas
filed a complaint for damages against Filcar and Carmen
Flor before the Metropolitan Trial Court (MeTC) of Manila,
and the case was raffled to Branch 13. In the complaint,
Espinas demanded that Filcar and Carmen Flor pay the
amount of ₱97,910.00, representing actual damages
sustained by his car.
31
Filcar argued that while it is the registered owner of the car
that hit and bumped Espinas’ car, the car was assigned to its
Corporate Secretary Atty. Candido Flor, the husband of
Carmen Flor. Filcar further stated that when the incident
happened, the car was being driven by Atty. Flor’s personal
driver, Timoteo Floresca.
Atty. Flor, for his part, alleged that when the incident
occurred, he was attending a birthday celebration at a
nearby hotel, and it was only later that night when he
noticed a small dent on and the cracked signal light of the
car. On seeing the dent and the crack, Atty. Flor allegedly
asked Floresca what happened, and the driver replied that it
was a result of a "hit and run" while the car was parked in
front of Bogota on Pedro Gil Avenue, Manila.
Filcar denied any liability to Espinas and claimed that the
incident was not due to its fault or negligence since Floresca
was not its employee but that of Atty. Flor. Filcar and
Carmen Flor both said that they always exercised the due
diligence required of a good father of a family in leasing or
assigning their vehicles to third parties.
The MeTC Decision
The MeTC, in its decision dated January 20, 2004,4 ruled in
favor of Espinas, and ordered Filcar and Carmen Flor,
jointly and severally, to pay Espinas ₱97,910.00 as actual
damages, representing the cost of repair, with interest at 6%
per annum from the date the complaint was filed;
₱50,000.00 as moral damages; ₱20,000.00 as exemplary
damages; and ₱20,000.00 as attorney’s fees. The MeTC
ruled that Filcar, as the registered owner of the vehicle, is
primarily responsible for damages resulting from the
vehicle’s operation.
The RTC Decision
The Regional Trial Court (RTC) of Manila, Branch 20, in the
exercise of its appellate jurisdiction, affirmed the MeTC
decision.5 The RTC ruled that Filcar failed to prove that
Floresca was not its employee as no proof was adduced that
Floresca was personally hired by Atty. Flor. The RTC agreed
with the MeTC that the registered owner of a vehicle is
directly and primarily liable for the damages sustained by
third persons as a consequence of the negligent or careless
operation of a vehicle registered in its name. The RTC added
that the victim of recklessness on the public highways is
without means to discover or identify the person actually
causing the injury or damage. Thus, the only recourse is to
determine the owner, through the vehicle’s registration, and
to hold him responsible for the damages.

The CA Decision
On appeal, the CA partly granted the petition in CA-G.R. SP
No. 86603; it modified the RTC decision by ruling that
Carmen Flor, President and General Manager of Filcar, is
not personally liable to Espinas. The appellate court pointed
out that, subject to recognized exceptions, the liability of a
corporation is not the liability of its corporate officers
because a corporate entity – subject to well-recognized
exceptions – has a separate and distinct personality from its
officers and shareholders. Since the circumstances in the
case at bar do not fall under the exceptions recognized by
law, the CA concluded that the liability for damages cannot
attach to Carmen Flor.
The CA, however, affirmed the liability of Filcar to pay
Espinas damages. According to the CA, even assuming that
there had been no employer-employee relationship between
Filcar and the driver of the vehicle, Floresca, the former can
be held liable under the registered owner rule.
The CA relied on the rule that the registered owner of a
vehicle is directly and primarily responsible to the public
and to third persons while the vehicle is being operated.
Citing Erezo, et al. v. Jepte,6 the CA said that the rationale
behind the rule is to avoid circumstances where vehicles
running on public highways cause accidents or injuries to
pedestrians or other vehicles without positive identification
of the owner or drivers, or with very scant means of
identification. In Erezo, the Court said that the main aim of
motor vehicle registration is to identify the owner, so that if
a vehicle causes damage or injury to pedestrians or other
vehicles, responsibility can be traced to a definite individual
and that individual is the registered owner of the vehicle.7
The CA did not accept Filcar’s argument that it cannot be
held liable for damages because the driver of the vehicle was
not its employee. In so ruling, the CA cited the case of
Villanueva v. Domingo8 where the Court said that the
question of whether the driver was authorized by the actual
owner is irrelevant in determining the primary and direct
responsibility of the registered owner of a vehicle for
accidents, injuries and deaths caused by the operation of his
vehicle.
Filcar filed a motion for reconsideration which the CA
denied in its Resolution dated July 6, 2006.
Hence, the present petition.
The Issue
Simply stated, the issue for the consideration of this Court
is: whether Filcar, as registered owner of the motor vehicle
which figured in an accident, may be held liable for the
damages caused to Espinas.
Our Ruling
The petition is without merit.
Filcar, as registered owner, is deemed the employer of the
driver, Floresca, and is thus vicariously liable under Article
2176 in relation with Article 2180 of the Civil Code
It is undisputed that Filcar is the registered owner of the
motor vehicle which hit and caused damage to Espinas’ car;
and it is on the basis of this fact that we hold Filcar
primarily and directly liable to Espinas for damages.
As a general rule, one is only responsible for his own act or
omission.9 Thus, a person will generally be held liable only
for the torts committed by himself and not by another. This
general rule is laid down in Article 2176 of the Civil Code,
which provides to wit:
Article 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of
this Chapter.
Based on the above-cited article, the obligation to indemnify
another for damage caused by one’s act or omission is
imposed upon the tortfeasor himself, i.e., the person who
committed the negligent act or omission. The law, however,
provides for exceptions when it makes certain persons liable
for the act or omission of another.
One exception is an employer who is made vicariously liable
for the tort committed by his employee. Article 2180 of the
Civil Code states:
Article 2180. The obligation imposed by Article 2176 is
demandable not only for one’s own acts or omissions, but
also for those of persons for whom one is responsible.
x x x x Employers shall be liable for the damages caused by
their employees and household helpers acting within the
scope of their assigned tasks, even though the former are
not engaged in any business or industry.
x x x x The responsibility treated of in this article shall cease
when the persons herein mentioned prove that they
32
observed all the diligence of a good father of a family to
prevent damage.
Under Article 2176, in relation with Article 2180, of the Civil
Code, an action predicated on an employee’s act or omission
may be instituted against the employer who is held liable for
the negligent act or omission committed by his employee.
Although the employer is not the actual tortfeasor, the law
makes him vicariously liable on the basis of the civil law
principle of pater familias for failure to exercise due care
and vigilance over the acts of one’s subordinates to prevent
damage to another.10 In the last paragraph of Article 2180 of
the Civil Code, the employer may invoke the defense that he
observed all the diligence of a good father of a family to
prevent damage.
As its core defense, Filcar contends that Article 2176, in
relation with Article 2180, of the Civil Code is inapplicable
because it presupposes the existence of an employer-
employee relationship. According to Filcar, it cannot be held
liable under the subject provisions because the driver of its
vehicle at the time of the accident, Floresca, is not its
employee but that of its Corporate Secretary, Atty. Flor.
We cannot agree. It is well settled that in case of motor
vehicle mishaps, the registered owner of the motor vehicle is
considered as the employer of the tortfeasor-driver, and is
made primarily liable for the tort committed by the latter
under Article 2176, in relation with Article 2180, of the Civil
Code.
In Equitable Leasing Corporation v. Suyom,11 we ruled that
in so far as third persons are concerned, the registered
owner of the motor vehicle is the employer of the negligent
driver, and the actual employer is considered merely as an
agent of such owner.
In that case, a tractor registered in the name of Equitable
Leasing Corporation (Equitable) figured in an accident,
killing and seriously injuring several persons. As part of its
defense, Equitable claimed that the tractor was initially
leased to Mr. Edwin Lim under a Lease Agreement, which
agreement has been overtaken by a Deed of Sale entered
into by Equitable and Ecatine Corporation (Ecatine).
Equitable argued that it cannot be held liable for damages
because the tractor had already been sold to Ecatine at the
time of the accident and the negligent driver was not its
employee but of Ecatine.

In upholding the liability of Equitable, as registered owner
of the tractor, this Court said that "regardless of sales made
of a motor vehicle, the registered owner is the lawful
operator insofar as the public and third persons are
concerned; consequently, it is directly and primarily
responsible for the consequences of its operation."12 The
Court further stated that "[i]n contemplation of law, the
owner/operator of record is the employer of the driver, the
actual operator and employer being considered as merely its
agent."13 Thus, Equitable, as the registered owner of the
tractor, was considered under the law on quasi delict to be
the employer of the driver, Raul Tutor; Ecatine, Tutor’s
actual employer, was deemed merely as an agent of
Equitable.
Thus, it is clear that for the purpose of holding the
registered owner of the motor vehicle primarily and directly
liable for damages under Article 2176, in relation with
Article 2180, of the Civil Code, the existence of an employer-
employee relationship, as it is understood in labor relations
law, is not required. It is sufficient to establish that Filcar is
the registered owner of the motor vehicle causing damage in
order that it may be held vicariously liable under Article
2180 of the Civil Code.
Rationale for holding the registered owner vicariously liable
The rationale for the rule that a registered owner is
vicariously liable for damages caused by the operation of his
motor vehicle is explained by the principle behind motor
vehicle registration, which has been discussed by this Court
in Erezo, and cited by the CA in its decision:
The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage
or injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual,
the registered owner. Instances are numerous where
vehicles running on public highways caused accidents or
injuries to pedestrians or other vehicles without positive
identification of the owner or drivers, or with very scant
means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in
the interest of the determination of persons responsible for
damages or injuries caused on public highways. [emphasis
ours]
Thus, whether there is an employer-employee relationship
between the registered owner and the driver is irrelevant in
determining the liability of the registered owner who the law
holds primarily and directly responsible for any accident,
injury or death caused by the operation of the vehicle in the
streets and highways.
As explained by this Court in Erezo, the general public
policy involved in motor vehicle registration is the
protection of innocent third persons who may have no
means of identifying public road malefactors and, therefore,
would find it difficult – if not impossible – to seek redress
for damages they may sustain in accidents resulting in
deaths, injuries and other damages; by fixing the person
held primarily and directly liable for the damages sustained
by victims of road mishaps, the law ensures that relief will
always be available to them.
To identify the person primarily and directly responsible for
the damages would also prevent a situation where a
registered owner of a motor vehicle can easily escape
liability by passing on the blame to another who may have
no means to answer for the damages caused, thereby
defeating the claims of victims of road accidents. We take
note that some motor vehicles running on our roads are
driven not by their registered owners, but by employed
drivers who, in most instances, do not have the financial
means to pay for the damages caused in case of accidents.
These same principles apply by analogy to the case at bar.
Filcar should not be permitted to evade its liability for
damages by conveniently passing on the blame to another
party; in this case, its Corporate Secretary, Atty. Flor and his
alleged driver, Floresca. Following our reasoning in
Equitable, the agreement between Filcar and Atty. Flor to
assign the motor vehicle to the latter does not bind Espinas
who was not a party to and has no knowledge of the
agreement, and whose only recourse is to the motor vehicle
registration.
Neither can Filcar use the defenses available under Article
2180 of the Civil Code - that the employee acts beyond the
scope of his assigned task or that it exercised the due
diligence of a good father of a family to prevent damage -
because the motor vehicle registration law, to a certain
extent, modified Article 2180 of the Civil Code by making
these defenses unavailable to the registered owner of the
motor vehicle.1awp++i1 Thus, for as long as Filcar is the
registered owner of the car involved in the vehicular
accident, it could not escape primary liability for the
damages caused to Espinas.
33
The public interest involved in this case must not be
underestimated. Road safety is one of the most common
problems that must be addressed in this country. We are not
unaware of news of road accidents involving reckless drivers
victimizing our citizens. Just recently, such pervasive
recklessness among most drivers took the life of a professor
of our state university.14 What is most disturbing is that our
existing laws do not seem to deter these road malefactors
from committing acts of recklessness.
We understand that the solution to the problem does not
stop with legislation. An effective administration and
enforcement of the laws must be ensured to reinforce
discipline among drivers and to remind owners of motor
vehicles to exercise due diligence and vigilance over the acts
of their drivers to prevent damage to others.
Thus, whether the driver of the motor vehicle, Floresca, is
an employee of Filcar is irrelevant in arriving at the
conclusion that Filcar is primarily and directly liable for the
damages sustained by Espinas. While Republic Act No. 4136
or the Land Transportation and Traffic Code does not
contain any provision on the liability of registered owners in
case of motor vehicle mishaps, Article 2176, in relation with
Article 2180, of the Civil Code imposes an obligation upon
Filcar, as registered owner, to answer for the damages
caused to Espinas’ car. This interpretation is consistent with
the strong public policy of maintaining road safety, thereby
reinforcing the aim of the State to promote the responsible
operation of motor vehicles by its citizens.
This does not mean, however, that Filcar is left without any
recourse against the actual employer of the driver and the
driver himself. Under the civil law principle of unjust
enrichment, the registered owner of the motor vehicle has a
right to be indemnified by the actual employer of the driver
of the amount that he may be required to pay as damages
for the injury caused to another.
The set-up may be inconvenient for the registered owner of
the motor vehicle, but the inconvenience cannot outweigh
the more important public policy being advanced by the law
in this case which is the protection of innocent persons who
may be victims of reckless drivers and irresponsible motor
vehicle owners.
WHEREFORE, the petition is DENIED. The decision dated
February 16, 2006 and the resolution dated July 6, 2006 of
the Court of Appeals are AFFIRMED. Costs against
petitioner Filcar Transport Services.

SO ORDERED.
SECOND DIVISION
G.R. No. 181398 June 29, 2011
FEB LEASING AND FINANCE CORPORATION (now
BPI LEASING CORPORATION), Petitioner,
vs. SPOUSES SERGIO P. BAYLON and MARITESS
VILLENA-BAYLON, BG HAULER, INC., and
MANUEL Y. ESTILLOSO, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1 of the 9 October
2007 Decision2 and the 18 January 2008 Resolution3 of the
Court of Appeals in CA-G.R. CV No. 81446. The 9 October
2007 Decision affirmed the 30 October 2003 Decision4 of
the Regional Trial Court (Branch 35) of Gapan City in Civil
Case No. 2334 ordering petitioner to pay respondents
damages. The 18 January 2008 Resolution denied
petitioner’s motion for reconsideration.
The Facts
On 2 September 2000, an Isuzu oil tanker running along
Del Monte Avenue in Quezon City and bearing plate number
TDY 712 hit Loretta V. Baylon (Loretta), daughter of
respondent spouses Sergio P. Baylon and Maritess Villena-
Baylon (spouses Baylon). At the time of the accident, the oil
tanker was registered5 in the name of petitioner FEB
Leasing and Finance Corporation6 (petitioner). The oil
tanker was leased7 to BG Hauler, Inc. (BG Hauler) and was
being driven by the latter’s driver, Manuel Y. Estilloso. The
oil tanker was insured8 by FGU Insurance Corp. (FGU
Insurance).
The accident took place at around 2:00 p.m. as the oil
tanker was coming from Balintawak and heading towards
Manila. Upon reaching the intersection of Bonifacio Street
and Del Monte Avenue, the oil tanker turned left. While the
driver of the oil tanker was executing a left turn side by side
with another vehicle towards Del Monte Avenue, the oil
tanker hit Loretta who was then crossing Del Monte Avenue
coming from Mayon Street. Due to the strong impact,
Loretta was violently thrown away about three to five
meters from the point of impact. She fell to the ground
unconscious. She was brought for treatment to the Chinese
General Hospital where she remained in a coma until her
death two days after.9
The spouses Baylon filed with the RTC (Branch 35) of
Gapan City a Complaint10 for damages against petitioner,
BG Hauler, the driver, and FGU Insurance. Petitioner filed
its answer with compulsory counterclaim while FGU
Insurance filed its answer with counterclaim. On the other
hand, BG Hauler filed its answer with compulsory
counterclaim and cross-claim against FGU Insurance.
Petitioner claimed that the spouses Baylon had no cause of
action against it because under its lease contract with BG
Hauler, petitioner was not liable for any loss, damage, or
injury that the leased oil tanker might cause. Petitioner
claimed that no employer-employee relationship existed
between petitioner and the driver.
BG Hauler alleged that neither do the spouses Baylon have a
cause of action against it since the oil tanker was not
registered in its name. BG Hauler contended that the victim
was guilty of contributory negligence in crossing the street.
BG Hauler claimed that even if its driver was at fault, BG
Hauler exercised the diligence of a good father of a family in
the selection and supervision of its driver. BG Hauler also
contended that FGU Insurance is obliged to assume all
liabilities arising from the use of the insured oil tanker.
For its part, FGU Insurance averred that the victim was
guilty of contributory negligence. FGU Insurance concluded
that the spouses Baylon could not expect to be paid the full
amount of their claims. FGU Insurance pointed out that the
insurance policy covering the oil tanker limited any claim to
a maximum of ₱400,000.00.
During trial, FGU Insurance moved that (1) it be allowed to
deposit in court the amount of ₱450,000.00 in the joint
names of the spouses Baylon, petitioner, and BG Hauler and
(2) it be released from further participating in the
proceedings. After the RTC granted the motion, FGU
Insurance deposited in the Branch Clerk of Court a check in
the names of the spouses Baylon, petitioner, and BG Hauler.
The RTC then released FGU Insurance from its contractual
obligations under the insurance policy.
The Ruling of the RTC
After weighing the evidence submitted by the parties, the
RTC found that the death of Loretta was due to the
negligent act of the driver. The RTC held that BG Hauler, as
the employer, was solidarily liable with the driver. The RTC
further held that petitioner, as the registered owner of the
oil tanker, was also solidarily liable.
The RTC found that since FGU Insurance already paid the
amount of ₱450,000.00 to the spouses Baylon, BG Hauler,
and petitioner, the insurer’s obligation has been
satisfactorily fulfilled. The RTC thus dismissed the cross-
34
claim of BG Hauler against FGU Insurance. The decretal
part of the RTC’s decision reads:
Wherefore, premises considered, judgment is hereby
rendered in favor of the plaintiffs and against defendants
FEB Leasing (now BPI Leasing), BG Hauler, and Manuel
Estilloso, to wit:
1. Ordering the defendants, jointly and severally, to pay
plaintiffs the following:
a. the amount of ₱62,000.00 representing actual expenses
incurred by the plaintiffs;
b. the amount of ₱50,000.00 as moral damages;
c. the amount of ₱2,400,000.00 for loss of earning capacity
of the deceased victim, Loretta V. Baylon;
d. the sum of ₱50,000.00 for death indemnity;
e. the sum of ₱50,000.00 for and as attorney’s fees; and
f. with costs against the defendants.
2. Ordering the dismissal of defendants’ counter-claim for
lack of merit and the cross claim of defendant BG Hauler
against defendant FGU Insurance.
SO ORDERED.11
Petitioner, BG Hauler, and the driver appealed the RTC
Decision to the Court of Appeals. Petitioner claimed that as
financial lessor, it is exempt from liability resulting from
any loss, damage, or injury the oil tanker may cause while
being operated by BG Hauler as financial lessee.
On the other hand, BG Hauler and the driver alleged that no
sufficient evidence existed proving the driver to be at fault.
They claimed that the RTC erred in finding BG Hauler
negligent despite the fact that it had exercised the diligence
of a good father of a family in the selection and supervision
of its driver and in the maintenance of its vehicles. They
contended that petitioner, as the registered owner of the oil
tanker, should be solely liable for Loretta’s death.
The Ruling of the Court of Appeals
The Court of Appeals held that petitioner, BG Hauler, and
the driver are solidarily liable for damages arising from
Loretta’s death. Petitioner’s liability arose from the fact that
it was the registered owner of the oil tanker while BG
Hauler’s liability emanated from a provision in the lease
contract providing that the lessee shall be liable in case of
any loss, damage, or injury the leased oil tanker may cause.

Thus, the Court of Appeals affirmed the RTC Decision but
with the modification that the award of attorney’s fees be
deleted for being speculative. The dispositive part of the
appellate court’s Decision reads:
WHEREFORE, in the light of the foregoing, the instant
appeal is DENIED. Consequently, the assailed Decision of
the lower court is AFFIRMED with the MODIFICATION
that the award of attorney’s fees is DELETED.
IT IS SO ORDERED.12
Dissatisfied, petitioner and BG Hauler, joined by the driver,
filed two separate motions for reconsideration. In its 18
January 2008 Resolution, the Court of Appeals denied both
motions for lack of merit.
Unconvinced, petitioner alone filed with this Court the
present petition for review on certiorari impleading the
spouses Baylon, BG Hauler, and the driver as respondents.13
The Issue
The sole issue submitted for resolution is whether the
registered owner of a financially leased vehicle remains
liable for loss, damage, or injury caused by the vehicle
notwithstanding an exemption provision in the financial
lease contract.
The Court’s Ruling
Petitioner contends that the lease contract between BG
Hauler and petitioner specifically provides that BG Hauler
shall be liable for any loss, damage, or injury the leased oil
tanker may cause even if petitioner is the registered owner
of the said oil tanker. Petitioner claims that the Court of
Appeals erred in holding petitioner solidarily liable with BG
Hauler despite having found the latter liable under the lease
contract.
For their part, the spouses Baylon counter that the lease
contract between petitioner and BG Hauler cannot bind
third parties like them. The spouses Baylon maintain that
the existence of the lease contract does not relieve petitioner
of direct responsibility as the registered owner of the oil
tanker that caused the death of their daughter.
On the other hand, BG Hauler and the driver argue that at
the time petitioner and BG Hauler entered into the lease
contract, Republic Act No. 598014 was still in effect. They
point out that the amendatory law, Republic Act No.
8556,15 which exempts from liability in case of any loss,
damage, or injury to third persons the registered owners of
vehicles financially leased to another, was not yet enacted at
that time.
In point is the 2008 case of PCI Leasing and Finance, Inc.
v. UCPB General Insurance Co., Inc.16 There, we held liable
PCI Leasing and Finance, Inc., the registered owner of an
18-wheeler Fuso Tanker Truck leased to Superior Gas &
Equitable Co., Inc. (SUGECO) and being driven by the
latter’s driver, for damages arising from a collision. This
despite an express provision in the lease contract to the
effect that the lessee, SUGECO, shall indemnify and hold
the registered owner free from any liabilities, damages,
suits, claims, or judgments arising from SUGECO’s use of
the leased motor vehicle.
In the instant case, Section 5.1 of the lease contract between
petitioner and BG Hauler provides:
Sec. 5.1. It is the principle of this Lease that while the title or
ownership of the EQUIPMENT, with all the rights
consequent thereof, are retained by the LESSOR, the risk of
loss or damage of the EQUIPMENT from whatever source
arising, as well as any liability resulting from the
ownership, operation and/or possession
thereof, over and above those actually compensated
by insurance, are hereby transferred to and
assumed by the LESSEE hereunder which shall continue
in full force and effect.17 (Emphasis supplied)
If it so wishes, petitioner may proceed against BG Hauler to
seek enforcement of the latter’s contractual obligation under
Section 5.1 of the lease contract. In the present case,
petitioner did not file a cross-claim against BG Hauler.
Hence, this Court cannot require BG Hauler to reimburse
petitioner for the latter’s liability to the spouses Baylon.
However, as the registered owner of the oil tanker,
petitioner may not escape its liability to third persons.
Under Section 5 of Republic Act No. 4136,18 as amended, all
motor vehicles used or operated on or upon any highway of
the Philippines must be registered with the Bureau of Land
Transportation (now Land Transportation Office) for the
current year.19 Furthermore, any encumbrances of motor
vehicles must be recorded with the Land Transportation
Office in order to be valid against third parties.20
In accordance with the law on compulsory motor vehicle
registration, this Court has consistently ruled that, with
respect to the public and third persons, the registered owner
of a motor vehicle is directly and primarily responsible for
35
the consequences of its operation regardless of who the
actual vehicle owner might be.21 Well-settled is the rule that
the registered owner of the vehicle is liable for quasi-delicts
resulting from its use. Thus, even if the vehicle has already
been sold, leased, or transferred to another person at the
time the vehicle figured in an accident, the registered
vehicle owner would still be liable for damages caused by
the accident. The sale, transfer or lease of the vehicle, which
is not registered with the Land Transportation Office, will
not bind third persons aggrieved in an accident involving
the vehicle. The compulsory motor vehicle registration
underscores the importance of registering the vehicle in the
name of the actual owner.1avvphi1
The policy behind the rule is to enable the victim to find
redress by the expedient recourse of identifying the
registered vehicle owner in the records of the Land
Transportation Office. The registered owner can be
reimbursed by the actual owner, lessee or transferee who is
known to him. Unlike the registered owner, the innocent
victim is not privy to the lease, sale, transfer or
encumbrance of the vehicle. Hence, the victim should not be
prejudiced by the failure to register such transaction or
encumbrance. As the Court held in PCI Leasing:
The burden of registration of the lease contract is minuscule
compared to the chaos that may result if registered owners
or operators of vehicles are freed from such responsibility.
Petitioner pays the price for its failure to obey the law on
compulsory registration of motor vehicles for registration is
a pre-requisite for any person to even enjoy the privilege of
putting a vehicle on public roads.22
In the landmark case of Erezo v. Jepte,23 the Court
succinctly laid down the public policy behind the rule, thus:
The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage
or injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual,
the registered owner. Instances are numerous where
vehicles running on public highways caused accidents or
injuries to pedestrians or other vehicles without positive
identification of the owner or drivers, or with very scant
means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in
the interest of the determination of persons responsible for
damages or injuries caused on public highways.

x x x Were a registered owner allowed to evade
responsibility by proving who the supposed transferee or
owner is, it would be easy for him, by collusion with others
or, or otherwise, to escape said responsibility and transfer
the same to an indefinite person, or to one who possesses no
property with which to respond financially for the damage
or injury done. A victim of recklessness on the public
highways is usually without means to discover or identify
the person actually causing the injury or damage. He has no
means other than by a recourse to the registration in the
Motor Vehicles Office to determine who is the owner. The
protection that the law aims to extend to him would become
illusory were the registered owner given the opportunity to
escape liability by disproving his ownership. If the policy of
the law is to be enforced and carried out, the registered
owner should not be allowed to prove the contrary to the
prejudice of the person injured, that is to prove that a third
person or another has become the owner, so that he may be
thereby be relieved of the responsibility to the injured
person.24
In this case, petitioner admits that it is the registered owner
of the oil tanker that figured in an accident causing the
death of Loretta. As the registered owner, it cannot escape
liability for the loss arising out of negligence in the
operation of the oil tanker. Its liability remains even if at the
time of the accident, the oil tanker was leased to BG Hauler
and was being driven by the latter’s driver, and despite a
provision in the lease contract exonerating the registered
owner from liability.
As a final point, we agree with the Court of Appeals that the
award of attorney’s fees by the RTC must be deleted for lack
of basis. The RTC failed to justify the award of ₱50,000
attorney’s fees to respondent spouses Baylon. The award of
attorney’s fees must have some factual, legal and equitable
bases and cannot be left to speculations and
conjectures.25 Consistent with prevailing
jurisprudence,26 attorney’s fees as part of damages are
awarded only in the instances enumerated in Article 2208 of
the Civil Code.27 Thus, the award of attorney’s fees is the
exception rather than the rule. Attorney’s fees are not
awarded every time a party prevails in a suit because of the
policy that no premium should be placed on the right to
litigate.28
WHEREFORE, we DENY the petition. We AFFIRM the
9 October 2007 Decision and the 18 January 2008
Resolution of the Court of Appeals in CA-G.R. CV No. 81446
affirming with modification the 30 October 2003 Decision
of the Regional Trial Court (Branch 35) of Gapan City in
Civil Case No. 2334 ordering petitioner FEB Leasing and
Finance Corporation, BG Hauler, Inc., and driver Manuel Y.
Estilloso to solidarily pay respondent spouses Sergio P.
Baylon and Maritess Villena-Baylon the following amounts:
a. ₱62,000.00 representing actual expenses incurred by the
plaintiffs;
b. ₱50,000.00 as moral damages;
c. ₱2,400,000.00 for loss of earning capacity of the
deceased victim, Loretta V. Baylon; and
d. ₱50,000.00 for death indemnity.
Costs against petitioner.
SO ORDERED.
SECOND DIVISION
G.R. No. 152033 March 16, 2011
FILIPINAS SYNTHETIC FIBER
CORPORATION, Petitioner,
vs. WILFREDO DE LOS SANTOS, BENITO JOSE DE
LOS SANTOS, MARIA ELENA DE LOS SANTOS and
CARMINA VDA. DE LOS SANTOS, Respondents.
DECISION
PERALTA, J.:
This Petition for Review under Rule 45 of the 1997 Rules of
Civil Procedure assails the Decision1 of the Court of Appeals
(CA) dated August 15, 2001, affirming with modification,
the Decision2 dated February 14, 1994 of the Regional Trial
Court (RTC), and the Resolution dated January 29, 2002 of
the CA, denying petitioner's Motion for Reconsideration.
This all stems from a case for damages filed against the
petitioner and one of its employees. The facts, as found by
the RTC and the CA, are as follows:
On the night of September 30, 1984, Teresa Elena Legarda-
de los Santos (Teresa Elena), the wife of respondent
Wilfredo de los Santos (Wilfredo), performed at the Rizal
Theater in Makati City, Metro Manila as a member of the
cast for the musical play, Woman of the Year.
On that same night, at the request of Wilfredo, his brother
Armando de los Santos (Armando), husband of respondent
Carmina Vda. de los Santos, went to the Rizal Theater to
fetch Teresa Elena after the latter's performance. He drove a
1980 Mitsubishi Galant Sigma (Galant Sigma) with Plate
No. NSL 559, a company car assigned to Wilfredo.
Two other members of the cast of Woman of the Year,
namely, Annabel Vilches (Annabel) and Jerome Macuja,
joined Teresa Elena in the Galant Sigma.
36
Around 11:30 p.m., while travelling along the Katipunan
Road (White Plains), the Galant Sigma collided with the
shuttle bus owned by petitioner and driven by Alfredo S.
Mejia (Mejia), an employee of petitioner. The Galant Sigma
was dragged about 12 meters from the point of impact,
across the White Plains Road landing near the perimeter
fence of Camp Aguinaldo, where the Galant Sigma burst
into flames and burned to death beyond recognition all four
occupants of the car.
A criminal charge for reckless imprudence resulting in
damage to property with multiple homicide was brought
against Mejia, which was decided in favor of Mejia. The
family of Annabel filed a civil case against petitioner and
Mejia docketed as Civil Case No. Q-51382, which was raffled
to Branch 82 of the RTC of Quezon City. Wilfredo and
Carmina, joined by their minor children, also filed separate
actions for damages against petitioner and Mejia. The said
cases were eventually consolidated.
After trial on the merits, the RTC decided in favor of herein
respondents. The dispositive portion of the decision reads:
WHEREFORE, in view of the foregoing, this Court finds the
herein plaintiffs in Civil Case Nos. Q-44498 and Q-45602,
namely Wilfredo de los Santos, et al. and Carmina Vda. de
los Santos, et al., respectively, to have duly proven their
causes of action against Filipinas Synthetic Fiber
Corporation and Alfredo S. Mejia, defendants in both cases,
thru preponderance of evidence, hence, Judgment is hereby
rendered ordering defendants, jointly and severally, to pay
the herein plaintiffs in Civil Case No. Q-44498, (1) for actual
damages, ₱29,550.00, with interest thereon at the legal rate
until paid; (2) the amount of ₱4,769,525.00 as
compensatory damages and unrealized income of Teresa
Elena, which is one-half of the amount of ₱9,539,050.00,
taking into consideration her status in life, and that during
her lifetime she was not only spending for herself. The
latter's average expenses would either be more or less than
one-half of her gross income for the year; (3) ₱100,000.00
as moral damages to assuage the family of the deceased
Teresa Elena for the loss of a love one who was charred
beyond recognition; and (4) attorney's fees of ₱150,000.00.
As to exemplary damages, the same cannot be granted for
the reason that no one wanted this unfortunate accident to
happen, which was a costly one.
For Civil Case No. Q-45602, the herein defendants are
hereby ordered, jointly and severally, to pay the plaintiffs (1)
₱20,550.00 for actual damages, with interest thereon at the
legal rate until the same is paid; (2) ₱444,555.00 as

compensatory damages and unrealized income of the
deceased Armando de los Santos, for the same reason as the
deceased Teresa Elena, who during his lifetime, Armando
was not only spending for himself; (3) ₱100,000.00 as
moral damages to assuage the loss of a love one who was
burnt beyond recognition; and (4) ₱100,000.00 as
attorney's fees. As to exemplary damages, the same could
not be granted for the same reason as that in Civil Case No.
Q-44498.
SO ORDERED.
After the denial of the motion for reconsideration, petitioner
appealed to the CA, and the latter ruled:
WHEREFORE, the assailed February 14, 1994 Decision of
the Regional Trial Court of Quezon City, Branch 100 is
AFFIRMED, subject to modification that in Civil Case No.
Q-44498 the compensatory damages and unrealized income
of deceased Teresa Elena shall be ₱3,120,300.00, and in
Civil Case No. Q-45602 the compensatory damages and
unrealized income of deceased Armando shall be
₱509,649.00.
SO ORDERED.
The subsequent motion for reconsideration was also denied.
Hence, the present petition wherein the petitioner assigned
the following errors:
ASSIGNMENT OF ERRORS
I. THE HONORABLE COURT OF APPEALS ERRED IN
FINDING THE PETITIONER MEJIA NEGLIGENT, SUCH
NOT BEING SUPPORTED BY THE EVIDENCE ON
RECORD.
II. THE HONORABLE COURT OF APPEALS' FINDING
THAT PETITIONER FILSYN DID NOT EXERCISE THE
DUE DILIGENCE OF A GOOD FATHER OF A FAMILY IN
THE SELECTION AND SUPERVISION OF ITS
EMPLOYEES IS NOT SUPPORTED BY THE EVIDENCE
ON RECORD.
III. THE DAMAGES AWARDED BY THE HONORABLE
COURT OF APPEALS IS NOT IN ACCORD WITH THE
EVIDENCE ON RECORD.
The respondents filed their Comment3 dated June 7, 2002,
while the petitioner filed its Reply4 dated January 29, 2003.
Subsequently, their respective memoranda5 were filed.
The petition lacks merit.
Petitioner insists that the CA was not correct in ruling that
Mejia was negligent. It argues that the said conclusion was
not derived from the evidence adduced during the trial,
which, upon further analysis, makes the nature of the issue
presented to be factual.
Whether a person is negligent or not is a question of fact
which this Court cannot pass upon in a petition for review
on certiorari, as its jurisdiction is limited to reviewing
errors of law.6 As a rule, factual findings of the trial court,
affirmed by the CA, are final and conclusive and may not be
reviewed on appeal. The established exceptions are: (1)
when the inference made is manifestly mistaken, absurd or
impossible; (2) when there is grave abuse of discretion; (3)
when the findings are grounded entirely on speculations,
surmises or conjectures; (4) when the judgment of the CA is
based on misapprehension of facts; (5) when the findings of
fact are conflicting; (6) when the CA, in making its findings,
went beyond the issues of the case and the same is contrary
to the admissions of both appellant and appellee; (7) when
the findings of fact are conclusions without citation of
specific evidence on which they are based; (8) when the CA
manifestly overlooked certain relevant facts not disputed by
the parties and which, if properly considered, would justify a
different conclusion; and (9) when the findings of fact of the
CA are premised on the absence of evidence and are
contradicted by the evidence on record.7
Not falling under any of the exceptions enumerated above,
this Court must defer to the findings of the RTC and the CA.
Petitioner argues that the RTC admitted that De los Santos
made a turn along White Plains Road without exercising the
necessary care which could have prevented the accident
from happening. It quoted the following portion of the
RTC's decision:
The Court is convinced that defendant Mejia was running
real fast along EDSA when he saw a vehicle on the opposite
side suddenly turn left towards White Plains.
According to petitioner, the sudden turn of the vehicle used
by the victims should also be considered as negligence on
the part of the driver of that same vehicle, thus, mitigating,
if not absolving petitioner's liability. However, the said
argument deserves scant consideration.
37
It was well established that Mejia was driving at a speed
beyond the rate of speed required by law, specifically
Section 35 of Republic Act No. (RA) 4136.8 Given the
circumstances, the allowed rate of speed for Mejia's vehicle
was 50 kilometers per hour, while the records show that he
was driving at the speed of 70 kilometers per hour. Under
the New Civil Code,9 unless there is proof to the contrary, it
is presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any
traffic regulation. Apparently, in the present case, Mejia's
violation of the traffic rules does not erase the presumption
that he was the one negligent at the time of the collision.
Even apart from statutory regulations as to speed, a
motorist is nevertheless expected to exercise ordinary care
and drive at a reasonable rate of speed commensurate with
all the conditions encountered10 which will enable him to
keep the vehicle under control and, whenever necessary, to
put the vehicle to a full stop to avoid injury to others using
the highway.11 To suggest that De los Santos was equally
negligent based on that sole statement of the RTC is
erroneous. The entire evidence presented must be
considered as a whole. Incidentally, a close reading of the
ruling of the CA would clearly show the negligence of Mejia.
A portion of the decision reads:
A closer study of the Police Accident Report, Investigation
Report and the sketch of the accident would reveal nothing
but that the shuttle bus was traveling at such a reckless
speed that it collided with the car bearing the deceased. The
impact was such that the bus landed astride the car, dragged
the car across the right lane of White Plains Road, across the
concrete island/flower box in the center of White Plains
Road, destroying the lamp post in the island until both
vehicles landed by the petitioner fence of Camp Aguinaldo.
From those evidence, borne out by the records, there was
proof more than preponderant to conclude that Mejia was
traveling at an unlawful speed, hence, the negligent driver.
We, therefore, cannot find any error on the part of the trial
court in concluding that he (Mejia) was driving more than
his claim of 70 kilometers per hour. Significantly, the
claimed speed of Mejia is still unlawful, considering that
Section 35 of RA 4136 states that the maximum allowable
speed for trucks and buses must not exceed 50 kilometers
per hour. We are, therefore, unpersuaded by the
defendants-appellants’ claim that it was the driver of [the]
Galant Sigma who was negligent by not observing Sections
42(d) and 43(c) of RA 4136-A. Second sentence of Section
42 provides that the driver of any vehicle traveling at any
unlawful speed shall forfeit any right of way which he might
otherwise have. A person driving a vehicle is presumed
negligent if at the time of the mishap, he was violating a

traffic regulation. The excessive speed employed by Mejia
was the proximate cause of the collision that led to the
sudden death of Teresa Elena and Armando. If the
defendants-appellants truly believe that the accident was
caused by the negligence of the driver of the Galant Sigma,
they should have presented Mejia to the witness stand.
Being the driver, Mejia would have been in the best position
to establish their thesis that he was negligent when the
mishap happened. Under the RULES OF EVIDENCE
(Section 3[e], Rule 131), such suppression gives rise to the
presumption that his testimony would have been adverse, if
presented. It must be stressed further that Mejia left the
scene, not reporting the fatal accident to the authorities
neither did he wait for the police to arrive. He only
resurfaced on the day after the incident. This is a clear
transgression of Section 55 of RA 4136-A which provides:
SEC. 55 Duty of driver in case of accident. - In the [event]
that any accident should occur as a result of the operation of
a motor vehicle upon a highway, the driver shall stop
immediately, and, if requested by any person present, shall
show his driver's license, give his true name and address
and also the true name and address of the owner of the
motor vehicle.
No driver of a motor vehicle concerned in a vehicular
accident shall leave the scene of the accident without aiding
the victim, except under any of the following circumstances:
1. If he is in imminent danger of being seriously harmed by
any person or persons by reason of the accident;
2. If he reports the accident to the nearest officer of the law;
or
3. If he has to summon a physician or nurse to aid the victim.
xxxx
Equally untenable is the defendants-appellants contention
that it would be impossible for the shuttle bus which was
traveling at 70 kilometers per hour to stop. In view of this
assertion, we quote with favor the statement of Justice
Feliciano in the Kapalaran case that the law seeks to stop
and prevent the slaughter and maiming of people (whether
passenger or not) and the destruction of property (whether
freight or not) on our highways by buses, the very size and
power of which seem often to inflame the minds of the
drivers. To our mind, if a vehicle was travelling in an
allowable speed, its driver would not have a difficulty in
applying the brakes.
Anent the second issue raised, petitioner insists that it
exercised the due diligence of a good father of a family in the
selection and supervision of its employees. The RTC and the
CA find otherwise.
Under Article 218012 of the New Civil Code, when an injury
is caused by the negligence of the employee, there instantly
arises a presumption of law that there was negligence on the
part of the master or employer either in the selection of the
servant or employee, or in supervision over him after
selection or both. The liability of the employer under Article
2180 is direct and immediate; it is not conditioned upon
prior recourse against the negligent employee and a prior
showing of the insolvency of such employee. Therefore, it is
incumbent upon the private respondents (in this case, the
petitioner) to prove that they exercised the diligence of a
good father of a family in the selection and supervision of
their employee.13
Petitioner asserts that it had submitted and presented
during trial, numerous documents in support of its claim
that it had exercised the proper diligence in both the
selection and supervision of its employees. Among those
proofs are documents showing Mejia's proficiency and
physical examinations, as well as his NBI clearances. The
Employee Staff Head of the Human Resource Division of
the petitioner also testified that Mejia was constantly under
supervision and was given daily operational briefings.
Nevertheless, the RTC and the CA were correct in finding
those pieces of evidence presented by the petitioner
insufficient.
In Manliclic v. Calaunan,14 this Court ruled that:
In the selection of prospective employees, employers are
required to examine them as to their qualifications,
experience and service records. In the supervision of
employees, the employer must formulate standard
operating procedures, monitor their implementation and
impose disciplinary measures for the breach thereof. To
fend off vicarious liability, employers must submit concrete
proof, including documentary evidence, that they complied
with everything that was incumbent on them.
In Metro Manila Transit Corporation v. Court of Appeals,
it was explained that:
Due diligence in the supervision of employees on the other
hand, includes the formulation of suitable rules and
regulations for the guidance of employees and the issuance
of proper instructions intended for the protection of the
public and persons with whom the employer has relations
through his or its employees and the imposition of
necessary disciplinary measures upon employees in case of
breach or as may be warranted to ensure the performance of
38
acts indispensable to the business of and beneficial to their
employer. To this, we add that actual implementation and
monitoring of consistent compliance with said rules should
be the constant concern of the employer, acting through
dependable supervisors who should regularly report on
their supervisory functions.
In order that the defense of due diligence in the selection
and supervision of employees may be deemed sufficient and
plausible, it is not enough to emptily invoke the existence of
said company guidelines and policies on hiring and
supervision. As the negligence of the employee gives rise to
the presumption of negligence on the part of the employer,
the latter has the burden of proving that it has been diligent
not only in the selection of employees but also in the actual
supervision of their work. The mere allegation of the
existence of hiring procedures and supervisory policies,
without anything more, is decidedly not sufficient to
overcome such presumption.
We emphatically reiterate our holding, as a warning to all
employers, that "the formulation of various company
policies on safety without showing that they were being
complied with is not sufficient to exempt petitioner from
liability arising from negligence of its employees. It is
incumbent upon petitioner to show that in recruiting and
employing the erring driver the recruitment procedures and
company policies on efficiency and safety were followed." x
x x.15
Applying the above ruling, the CA, therefore, committed no
error in finding that the evidence presented by petitioner is
wanting. Thus, the CA ruled:
In the present case, Filsyn merely presented evidence on the
alleged care it took in the selection or hiring of Mejia way
back in 1974 or ten years before the fatal accident. Neither
did Filsyn present any proof of the existence of the rules and
regulations governing the conduct of its employees. It is
significant to note that in employing Mejia, who is not a
high school graduate, Filsyn waived its long-standing policy
requirement of hiring only high school graduates. It
insufficiently failed to explain the reason for such waiver
other than their allegation of Mejia's maturity and skill for
the job.
As revealed by the testimony of Rolando Landicho, Filsyn
admitted that their shuttle buses were used to ferry Filsyn's
employees for three shifts. It failed to show whether or not
Mejia was on duty driving buses for all three shifts. On the

other hand, the trial court found that Mejia, by the different
shifts would have been on the job for more than eight hours.
Fylsin did not even sufficiently prove that it exercised the
required supervision of Mejia by ensuring rest periods,
particularly for its night shift drivers who are working on a
time when most of us are usually taking rest. As correctly
argued by the plaintiffs-appellees, this is significant because
the accident happened at 11:30 p.m., when the shuttle bus
was under the control of a driver having no passenger at all.
Despite, the lateness of the hour and the darkness of the
surrounding area, the bus was travelling at a speed of 70
kilometers per hour.
In view of the absence of sufficient proof of its exercise of
due diligence, Filsyn cannot escape its solidary liability as
the owner of the wayward bus and the employer of the
negligent driver of the wayward bus. x x x
As to the amount of the damages awarded by the CA,
petitioner claims that it is not in accord with the evidence on
record. It explained that the amounts used in computing for
compensatory damages were based mainly on the assertions
of the respondents as to the amount of salary being received
by the two deceased at the time of their deaths.1awphil
This Court, in its ruling,16 expounded on the nature of
compensatory damages, thus:
Under Article 2199 of the New Civil Code, actual damages
include all the natural and probable consequences of the act
or omission complained of, classified as one for the loss of
what a person already possesses (daño emergente)and the
other, for the failure to receive, as a benefit, that which
would have pertained to him (lucro cesante). As
expostulated by the Court in PNOC Shipping and Transport
Corporation v. Court of Appeals:17
Under Article 2199 of the Civil Code, actual or
compensatory damages are those awarded in satisfaction of,
or in recompense for, loss or injury sustained. They proceed
from a sense of natural justice and are designed to repair the
wrong that has been done, to compensate for the injury
inflicted and not to impose a penalty. In actions based on
torts or quasi-delicts, actual damages include all the natural
and probable consequences of the act or omission
complained of. There are two kinds of actual or
compensatory damages: one is the loss of what a person
already possesses (daño emergente), and the other is the
failure to receive as a benefit that which would have
pertained to him (lucro cesante).18
The burden of proof is on the party who would be defeated if
no evidence would be presented on either side. The burden
is to establish one’s case by a preponderance of evidence
which means that the evidence, as a whole, adduced by one
side, is superior to that of the other. Actual damages are not
presumed. The claimant must prove the actual amount of
loss with a reasonable degree of certainty premised upon
competent proof and on the best evidence obtainable.
Specific facts that could afford a basis for measuring
whatever compensatory or actual damages are borne must
be pointed out. Actual damages cannot be anchored on mere
surmises, speculations or conjectures. As the Court
declared:
As stated at the outset, to enable an injured party to recover
actual or compensatory damages, he is required to prove the
actual amount of loss with reasonable degree of certainty
premised upon competent proof and on the best evidence
available. The burden of proof is on the party who would be
defeated if no evidence would be presented on either side.
He must establish his case by a preponderance of evidence
which means that the evidence, as a whole, adduced by one
side is superior to that of the other. In other words, damages
cannot be presumed and courts, in making an award, must
point out specific facts that could afford a basis for
measuring whatever compensatory or actual damages are
borne.19
The records show that the CA did not err in awarding the
said amounts, nor was there any mistake in its computation.
The respondents were able to establish their case by a
preponderance of evidence. However, the petitioner is
correct when it stated that the award of ₱100,000.00 as
moral damages is excessive. Jurisprudence has set the
amount to ₱50,000.00.20
WHEREFORE, the Petition for Review is
hereby DENIED. Consequently, the Decision of the Court
of Appeals, dated August 15, 2001, is
hereby AFFIRMED with the MODIFICATION that the
moral damages be reduced to ₱50,000.00.
SO ORDERED.
THIRD DIVISION
G.R. No. 138296 November 22, 2000
VIRON TRANSPORTATION CO., INC., petitioner,
vs. ALBERTO DELOS SANTOS y NATIVIDAD and
RUDY SAMIDAN, respondents.
DECISION
GONZAGA-REYES, J.:
This is a petition for review on certiorari which seeks to
reverse and set aside: (1) the decision of the Court of
39
Appeals1 promulgated on October 27, 1998 in CA-G.R. CV
No. 54080 entitled "Viron Transportation Co., Inc. vs.
Alberto delos Santos and Rudy Samidan" affirming the
decision of the Regional Trial Court of Manila2 in Civil Case
No. 93-67283 and (2) the resolution of the Court of Appeals
promulgated on April 14, 1999 denying the motion for
reconsideration.
The said civil case is an action to recover damages based
on quasi-delict filed as a result of a vehicular accident in the
afternoon of August 16, 1993 between a passenger bus
owned by petitioner Viron Transportation Co., Inc. and a
Forward Cargo Truck owned by private respondent Rudy
Samidan.
The conflicting versions of the accident were summarized by
the trial court and adopted by the Court of Appeals in the
assailed decision. The version of petitioner is as follows:
"Plaintiff, a public utility transportation company, is the
registered owner of Viron Transit Bus No. 1080, with Plate
No. TB-AVC-332; while the defendant Rudy Samidan is the
registered owner of the Forward Cargo Truck with Plate No.
TDY-524 which, at the time of the vehicular accident in
question, was driven and operated by the defendant Alberto
delos Santos y Natividad. On August 16, 1993, at around
2:30 in the afternoon, the aforesaid bus was driven by
plaintiff’s regular driver Wilfredo Villanueva along
MacArthur Highway within the vicinity of Barangay
Parsolingan, Gerona, Tarlac coming from the North en
route to its destination in Manila. It was following the
Forward Cargo Truck proceeding from the same direction
then being driven, as aforesaid, by the defendant Alberto
delos Santos. The cargo truck swerved to the right shoulder
of the road and, while about to be overtaken by the bus,
again swerved to the left to occupy its lane. It was at that
instance that the collision occurred, the left front side of the
truck collided with the right front side of the bus causing the
two vehicles substantial damages."3
On the other hand, the version of private respondents is as
follows:
"Defendant Alberto delos Santos was the driver of defendant
Rudy Samidan of the latter’s vehicle, a Forward Cargo Truck
with Plate No. TDY-524, on that fateful day in question. At
about 12:30 in the afternoon of August 16, 1993, he was
driving said truck along the National Highway within the
vicinity of Barangay Parsolingan, Gerona, Tarlac. The Viron
bus with Body No. 1080 and Plate No., TB-AVC-332, driven

by Wilfredo Villanueva y Gaudia, tried to overtake his truck,
and he swerved to the right shoulder of the highway, but as
soon as he occupied the right lane of the road, the cargo
truck which he was driving was hit by the Viron bus on its
left front side, as the bus swerved to his lane to avoid an
incoming bus on its opposite direction. With the driver of
another truck dealing likewise in vegetables, Dulnuan, the
two of them and the driver of the Viron bus proceeded to
report the incident to the Gerona Police Station. A Vehicular
Traffic Report was prepared by the police (See Exhibit "D"),
with a Sketch of the relative positions of the circumstances
leading to the vehicular collision. x x x."4
After trial, the lower court dismissed petitioner’s complaint
and sustained the private respondents’ counterclaim for
damages. It ordered the petitioner to pay the following
amounts:
1. ₱19,500.00, with interest thereon at 6% per annum from
the date of complaint, as actual damages, until the same
shall have been fully paid and satisfied;
2. ₱10,000.00 as additional compensatory damages for
transportation and accommodations during the trial of this
case;
3. ₱10,000.00 for and as attorney’s fees; and
4. Costs of suit."5
Not satisfied therewith, petitioner appealed to the Court of
Appeals which as mentioned at the outset affirmed in
toto the decision of the lower court. Its motion for
reconsideration having been denied, petitioner came to us
claiming that the Court of Appeals gravely erred
a) … IN FINDING THAT THE ACCIDENT WAS DUE TO
THE FAULT OF THE PETITIONER’S DRIVER;
b) … IN FINDING THE PETITIONER LIABLE FOR
DAMAGES WHEN THE COUNTERCLAIM FAILED TO
STATE A CAUSE OF ACTION FOR THERE IS NO
AVERMENT WHATSOEVER THEREIN THAT SAID
PETITIONER FAILED TO EXERCISE DUE DILIGENCE
OF A GOOD FATHER OF A FAMILY IN THE SELECTION
AND SUPERVISION OF ITS DRIVERS OR EMPLOYEES;
c) … IN AWARDING COMPENSATORY OR ACTUAL
DAMAGES AS WELL AS, TRAVELLING EXPENSES AND
ATTORNEY’S FEES WHEN THE SAME WERE NOT
SUBSTANTIATED OR BUTTRESSED BY THE EVIDENCE
ON RECORD;
d) … IN AFFIRMING THE DECISION OF THE COURT A
QUO DENYING PETITIONER’S MOTION TO PRESENT
REBUTTAL EVIDENCE.6
We resolved to give due course to the petition and required
the parties to submit their respective memoranda after due
consideration of the allegations, issues and arguments
adduced in the petition, the comment thereon by the private
respondents, and the reply to the comment filed by the
petitioner. The petitioner and private respondents filed their
respective memoranda in due time.
The first imputed error is without merit. Petitioner
endeavors to have this Court review the factual findings of
the trial court as sustained by the Court of Appeals finding
the driver of the Viron passenger bus at fault as the collision
resulted from the latter’s failed attempt to overtake the
cargo truck.
We are unable to sustain petitioner’s contention. The rule is
settled that the findings of the trial court especially when
affirmed by the Court of Appeals, are conclusive on this
Court when supported by the evidence on record.7 The
Supreme Court will not assess and evaluate all over again
the evidence, testimonial and documentary adduced by the
parties to an appeal particularly where, such as here, the
findings of both the trial court and the appellate court on
the matter coincide.8 Indeed, petitioner has failed to show
compelling grounds for a reversal of the following findings
and conclusions of the trial court and the Court of Appeals:
"There is no doubt whatsoever, in the mind of the Court, on
the basis of the documentary evidence (Exhibits "D", "4"
and "5") and the testimonies of the witnesses, that the
vehicular collision was due to the negligence of plaintiff’s
regular driver, Wilfredo Villanueva y Gaudia, at that time.
The cargo truck was on its proper lane at the time of the
collision. In fact, the cargo truck even swerved to the right
shoulder of the road to give much room for the Viron bus to
pass. Notwithstanding the condition of the road and the in-
coming Dagupan Bus from the opposite direction, the Viron
bus nonetheless proceeded to overtake the cargo truck,
bringing about the collision. The evidence is uniform as to
that fact. Indeed, no witnesses for the plaintiff ever
contradicted the obtrusive fact that it was while in the
process of overtaking the cargo truck that the Viron bus
collided with the former vehicle.
It is here well to recall that the driver of an overtaking
vehicle must see to it that the conditions are such that an
40
attempt to pass is reasonably safe and prudent, and in
passing must exercise reasonable care. In the absence of
clear evidence of negligence on the part of the operator of
the overtaken vehicle, the courts are inclined to put the
blame for an accident occurring while a passage is being
attempted on the driver of the overtaking vehicle (People vs.
Bolason, (C.A.) 53 Off. Gaz. 4158). As already intimated
elsewhere in this judgment, no evidence was presented by
the plaintiff to even intimate at the negligence of the driver
of the cargo truck."9
It is plain to see that the fault or negligence was attributable
to the driver of the Viron passenger bus. Petitioner proceeds
to attack, albeit feebly, the credibility of the two witnesses
presented by private respondents, namely, Alberto delos
Santos himself, who was then the driver of the Forward
Cargo Truck and a certain Manuel Dulnuan, who was then
travelling along the same highway coming from the opposite
direction when the accident occurred. According to
petitioner, the two witnesses contradicted each other when
"witness Dulnuan testified that the petitioner’s passenger
bus while attempting to overtake the respondents’ truck,
noticed the Dagupan passenger bus coming from the
opposite direction and to avoid hitting said passenger bus,
the Viron Transit passenger bus swerved to the right, hitting
in the process the front left side portion of the respondents’
truck;" while, "witness Alberto delos Santos testified that
prior to the accident, he swerved his truck to the right
shoulder of the road (western lane) and when he attempted
to return to his lane, the accident happened." Contrary to
petitioner’s assertion, the testimonies of the two witnesses
complement, if not corroborate each other. The Viron
passenger bus collided with the cargo truck in a vain
attempt to overtake the latter. At the sight of an oncoming
bus in the opposite direction, the Viron passenger bus
swerved to the right lane which was then occupied by the
cargo truck resulting in the collision of the two vehicles. In
reference to Alberto delos Santos’ testimony, the lower court
pointed out that the said driver of the cargo truck was on its
proper lane at the time of impact, and even swerved earlier
toward the right shoulder of the road just to give room to
the bus. In any event, it is doctrinally entrenched that the
assessment of the trial judge as to the issue of credibility
binds the appellate court because he is in a better position to
decide the issue, having heard the witnesses and observed
their deportment and manner of testifying during the trial,
except when the trial court has plainly overlooked certain
facts of substance and value, that, if considered, might affect
the result of the case, or where the assessment is clearly
shown to be arbitrary.10 Petitioner has not shown this case
to fall under the exception.

The second imputed error is without merit either. Petitioner
contends that private respondents’ counterclaim failed to
state a cause of action for there is no averment therein that
petitioner failed to exercise the diligence of a good father of
a family in the selection and supervision of its drivers or
employees. It is to be noted that petitioner Viron
Transportation Co., Inc., as the registered owner of the bus
involved in the subject vehicular accident originally brought
the action for damages against private respondents. Private
respondents as defendants in the court a quodenied any
liability and filed instead a counterclaim for damages
claiming that it was the driver of the bus who was at fault in
the operation of the bus. We find that the counterclaim of
private respondents alleges the ultimate facts constituting
their cause of action. It is not necessary to state that
petitioner was negligent in the supervision or selection of its
employees, as its negligence is presumed by operation of
law. The liability of the employer was explained in a case
thus:
"As employers of the bus driver, the petitioner is, under
Article 2180 of the Civil Code, directly and primary liable for
the resulting damages. The presumption that they are
negligent flows from the negligence of their employee. That
presumption, however, is only juris tantum, not juris et de
jure. Their only possible defense is that they exercised all
the diligence of a good father of a family to prevent the
damage. Article 2180 reads as follows:
"The obligation imposed by Article 2176 is demandable not
only for one’s own acts or omissions, but also for those of
persons for whom one is responsible. x x x
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not
engaged in any business or industry. x x x
The responsibility treated of in this article shall cease when
the persons herein mentioned prove that they observed all
the diligence of a good father of a family to prevent
damage."
The diligence of a good father referred to means the
diligence in the selection and supervision of employees.11
In fine, when the employee causes damage due to his own
negligence while performing his own duties, there arises
the juris tantum presumption that the employer is
negligent, rebuttable only by proof of observance of the
diligence of a good father of a family.12 Petitioner, through
its witnesses, namely, Danilo Azardon, a shop supervisor
and Fernando Mallare, an administrative officer, failed to
rebut such legal presumption of negligence in the selection
and supervision of employees, thus, petitioner as the
employer is responsible for damages, the basis of the
liability being the relationship of pater familias or on the
employer’s own negligence.13 Hence, with the allegations
and subsequent proof of negligence against the bus driver of
petitioner, the lower courts correctly adjudged petitioner
liable for damages.
Be that as it may, it is too late in the day for petitioner to
raise failure to state a cause of action as an issue. Rule 9,
Section 2 of the Rules of Court provides as a general rule
that "defenses and objections not pleaded either in a motion
to dismiss or in the answer are deemed waived." An
exception is made where there is a "failure to state a cause of
action which may be alleged in a later pleading, if one is
permitted, or by motion for judgment on the pleadings, or at
the trial on the merits; x x x." Applying said rule, petitioner
is now barred from raising said issue, which it did only for
the first time in the Court of Appeals and subsequently
before this Court. Petitioner did not raise the said issue in a
later pleading, i.e. answer to the counterclaim, or at any
time during the trial.
The fourth imputed error is likewise without merit. The
Court of Appeals committed no error in declaring the case
submitted for decision even without the testimony of
petitioner’s rebuttal witness. Petitioner has only itself to
blame for its failure to present its rebuttal witness as the
Court of Appeals explained thus:
"Appellant’s claim that the court a quo erred in not allowing
it to present rebuttal evidence, thus depriving it of its day in
court is without merit. A review of the records would show
that appellant was given ample opportunity to present its
rebuttal evidence but failed to so do. It was appellant itself
which sought the postponements and cancellations of the
hearings, after its motion for the presentation of rebuttal
evidence had been granted."14
There is, however, merit in the third imputed
error.1âwphi1 We find that with respect to the award of
damages, an oversight was committed by the Court of
Appeals. The Court of Appeals justified the award of actual
damages as follows:
41
"In the case at bench, the award of actual damages cannot
be said to be devoid of factual and legal basis. Appellees
were able to prove that damage had been suffered by the
cargo truck, the amount of which is shown in Exhibit 3, the
estimate of repair expenses. Moreover, the picture of the
damaged cargo truck (Exh. 1), more or less, supports the
amount of damage reflected in the repair estimate (Exh. 3).
As to the award of attorney’s fees, the Court finds the same
just and reasonable. The award of attorney’s fees is proper
where the acts and omissions of a party have compelled the
other party to litigate or incur expenses to protect his rights
and such may be recovered when deemed by the court as
just and equitable, as in the case at bar. x x x."15
Actual damages, to be recoverable, must not only be capable
of proof, but must actually be proved with a reasonable
degree of certainty. Courts cannot simply rely on
speculation, conjecture or guesswork in determining the fact
and amount of damages.16 To justify an award of actual
damages, there must be competent proof of the actual
amount of loss, credence can be given only to claims which
are duly supported by receipts.17 Considering that the actual
damages suffered by private respondents were based only
on a job estimate and a photo showing the damage to the
truck, there is absence of competent proof on the specific
amounts of actual damages suffered. Neither were the
transportation and accommodation expenses during the
trial supported by competent proof, the lower court having
relied merely on the unsubstantiated allegations of private
respondents.
Nonetheless, in the absence of competent proof on the
actual damages suffered, a party is entitled to temperate
damages. Article 2224 of the Civil Code provides that:
"Art. 2224. Temperate or moderate damages, which are
more than nominal but less than compensatory damages,
may be recovered when the court finds that some pecuniary
loss has been suffered but its amount can not, from the
nature of the case, be proved with certainty."
There is no doubt that the damage sustained by private
respondents' cargo truck was due to the fault or negligence
of petitioner's bus driver. The Court deems the amount of
P10,000.00 to be reasonable given the circumstances.18
With respect to the award of attorney’s fees, there is likewise
neither factual nor legal basis therefor. This case does not
fall under any of the instances found in Article 2208 of the

Civil Code19 for the proper award of attorney’s fees. The
futility of petitioner’s resort to judicial action without more
could not be taken against it. It cannot be said that
petitioner filed a clearly unfounded civil action against the
private respondents. A resort to judicial processes and a
subsequent defeat therein are not per se evidence of a
clearly unfounded suit, this is in line with the policy that no
penalty should be placed on the right to litigate.20
WHEREFORE, the challenged decision of the Court of
Appeals promulgated on October 27, 1998 in CA-G.R. CV
No. 54080 affirming that of the Regional Trial Court of
Manila, Branch 55, is hereby modified insofar as it awarded
actual damages to private respondents Alberto delos Santos
y Natividad and Rudy Samidan in the amount of ₱19,500.00
and an additional ₱10,000.00 as expenses for
transportation and accommodation during the trial for lack
of evidentiary bases therefor. Considering the fact, however,
that the cargo truck sustained damages due to the
negligence or fault of petitioner, the award of ₱10,000.00 in
favor of private respondents as and for temperate damages
is in order. The award of ₱10,000.00 as attorney’s fees is
DELETED for reasons above-stated.
SO ORDERED.
FIRST DIVISION
G.R. No. 156037 May 28, 2007
MERCURY DRUG CORPORATION, Petitioner,
vs. SEBASTIAN M. BAKING, Respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the instant Petition for Review on
Certiorari1 assailing the Decision2 dated May 30, 2002 and
Resolution dated November 5, 2002 of the Court of Appeals
in CA-G.R. CV No. 57435, entitled "Sebastian M. Baking,
plaintiff-appellee, versus Mercury Drug Co. Inc., defendant-
appellant."
The facts are:
On November 25, 1993, Sebastian M. Baking, respondent,
went to the clinic of Dr. Cesar Sy for a medical check-up. On
the following day, after undergoing an ECG, blood, and
hematology examinations and urinalysis, Dr. Sy found that
respondent’s blood sugar and triglyceride were above
normal levels. Dr. Sy then gave respondent two medical
prescriptions – Diamicron for his blood sugar and Benalize
tablets for his triglyceride.
Respondent then proceeded to petitioner Mercury Drug
Corporation (Alabang Branch) to buy the prescribed
medicines. However, the saleslady misread the prescription
for Diamicron as a prescription for Dormicum. Thus, what
was sold to respondent was Dormicum, a potent sleeping
tablet.
Unaware that what was given to him was the wrong
medicine, respondent took one pill of Dormicum on three
consecutive days –November 6, 1993 at 9:00 p.m.,
November 7 at 6:00 a.m., and November 8 at 7:30 a.m.
On November 8 or on the third day he took the medicine,
respondent figured in a vehicular accident. The car he was
driving collided with the car of one Josie Peralta.
Respondent fell asleep while driving. He could not
remember anything about the collision nor felt its impact.
Suspecting that the tablet he took may have a bearing on his
physical and mental state at the time of the collision,
respondent returned to Dr. Sy’s clinic. Upon being shown
the medicine, Dr. Sy was shocked to find that what was sold
to respondent was Dormicum, instead of the prescribed
Diamicron.
Thus, on April 14, 1994, respondent filed with the Regional
Trial Court (RTC), Branch 80 of Quezon City a complaint
for damages against petitioner, docketed as Civil Case No.
Q-94-20193.
After hearing, the trial court rendered its Decision dated
March 18, 1997 in favor of respondent, thus:
WHEREFORE, premises considered, by preponderance of
evidence, the Court hereby renders judgment in favor of the
plaintiff and against the defendant ordering the latter to pay
mitigated damages as follows:
1. ₱250,000.00 as moral damages;
2. ₱20,000.00 as attorney’s fees and litigation expenses;
3. plus ½% of the cost of the suit.
SO ORDERED.
On appeal, the Court of Appeals, in its Decision, affirmed in
toto the RTC judgment. Petitioner filed a motion for
reconsideration but it was denied in a Resolution dated
November 5, 2002.
Hence, this petition.
Petitioner contends that the Decision of the Court of
Appeals is not in accord with law or prevailing
jurisprudence.
42
Respondent, on the other hand, maintains that the petition
lacks merit and, therefore, should be denied.
The issues for our resolution are:
1. Whether petitioner was negligent, and if so, whether such
negligence was the proximate cause of respondent’s
accident; and
2. Whether the award of moral damages, attorney’s fees,
litigation expenses, and cost of the suit is justified.
Article 2176 of the New Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is
called a quasi-delict and is governed by the provisions of
this Chapter.
To sustain a claim based on the above provision, the
following requisites must concur: (a) damage suffered by
the plaintiff; (b) fault or negligence of the defendant; and,
(c) connection of cause and effect between the fault or
negligence of the defendant and the damage incurred by the
plaintiff.3
There is no dispute that respondent suffered damages.
It is generally recognized that the drugstore business is
imbued with public interest. The health and safety of the
people will be put into jeopardy if drugstore employees will
not exercise the highest degree of care and diligence in
selling medicines. Inasmuch as the matter of negligence is a
question of fact, we defer to the findings of the trial court
affirmed by the Court of Appeals.
Obviously, petitioner’s employee was grossly negligent in
selling to respondent Dormicum, instead of the prescribed
Diamicron. Considering that a fatal mistake could be a
matter of life and death for a buying patient, the said
employee should have been very cautious in dispensing
medicines. She should have verified whether the medicine
she gave respondent was indeed the one prescribed by his
physician. The care required must be commensurate with
the danger involved, and the skill employed must
correspond with the superior knowledge of the business
which the law demands.4

Petitioner contends that the proximate cause of the accident
was respondent’s negligence in driving his car.
We disagree.
Proximate cause is defined as any cause that produces
injury in a natural and continuous sequence, unbroken by
any efficient intervening cause, such that the result would
not have occurred otherwise. Proximate cause is determined
from the facts of each case, upon a combined consideration
of logic, common sense, policy, and precedent.5
Here, the vehicular accident could not have occurred had
petitioner’s employee been careful in reading Dr. Sy’s
prescription. Without the potent effects of Dormicum, a
sleeping tablet, it was unlikely that respondent would fall
asleep while driving his car, resulting in a collision.
Complementing Article 2176 is Article 2180 of the same
Code which states:
ART. 2180. The obligation imposed by Article 2176 is
demandable not only for one’s own acts or omissions, but
also for those of persons for whom one is responsible.
x x x The owners and managers of an establishment or
enterprise are likewise responsible for damages caused by
their employees in the service of the branches in which the
latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not
engaged in any business or industry. x x x
The responsibility treated of in this article shall cease when
the persons herein mentioned prove that they observed the
diligence of a good father of a family to prevent damage.
It is thus clear that the employer of a negligent employee is
liable for the damages caused by the latter. When an injury
is caused by the negligence of an employee, there instantly
arises a presumption of the law that there has been
negligence on the part of the employer, either in the
selection of his employee or in the supervision over him,
after such selection. The presumption, however, may be
rebutted by a clear showing on the part of the employer that
he has exercised the care and diligence of a good father of a
family in the selection and supervision of his
employee.6 Here, petitioner's failure to prove that it
exercised the due diligence of a good father of a family in the
selection and supervision of its employee will make it
solidarily liable for damages caused by the latter.
As regards the award of moral damages, we hold the same to
be in order. Moral damages may be awarded whenever the
defendant’s wrongful act or omission is the proximate cause
of the plaintiff’s physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury in the
cases specified or analogous to those provided in Article
2219 of the Civil Code.7
Respondent has adequately established the factual basis for
the award of moral damages when he testified that he
suffered mental anguish and anxiety as a result of the
accident caused by the negligence of petitioner’s employee.
There is no hard-and-fast rule in determining what would
be a fair and reasonable amount of moral damages, since
each case must be governed by its own peculiar facts.
However, it must be commensurate to the loss or injury
suffered.8 Taking into consideration the attending
circumstances here, we are convinced that the amount
awarded by the trial court is exorbitant. Thus, we reduce the
amount of moral damages from ₱250,000.00 to
₱50,000.00 only.
In addition, we also deem it necessary to award exemplary
damages. Article 2229 allows the grant of exemplary
damages by way of example or correction for the public
good. As mentioned earlier, the drugstore business is
affected with public interest. Petitioner should have exerted
utmost diligence in the selection and supervision of its
employees. On the part of the employee concerned, she
should have been extremely cautious in dispensing
pharmaceutical products. Due to the sensitive nature of its
business, petitioner must at all times maintain a high level
of meticulousness. Therefore, an award of exemplary
damages in the amount of ₱25,000.00 is in order.
On the matter of attorney’s fees and expenses of litigation, it
is settled that the reasons or grounds for the award thereof
must be set forth in the decision of the court.9 Since the trial
court’s decision did not give the basis of the award, the same
must be deleted. In Vibram Manufacturing Corporation v.
Manila Electric Company,10 we held:
43
Likewise, the award for attorney’s fees and litigation
expenses should be deleted. Well-enshrined is that "an
award for attorney’s fees must be stated in the text of the
court’s decision and not in the dispositive portion
only" (Consolidated Bank and Trust Corporation
(Solidbank) v. Court of Appeals, 246 SCRA 193 [1995] and
Keng Hua Paper Products, Inc. v. Court of Appeals, 286
SCRA 257 [1998]). This is also true with the litigation
expenses where the body of the decision discussed nothing
for its basis.
WHEREFORE, we DENY the petition. The challenged
Decision and Resolution of the Court of Appeals in CA-G.R.
CV No. 57435 are AFFIRMED with modification in the
sense that (a) the award of moral damages to respondent is
reduced from ₱250,000.00 to ₱50,000.00; (b) petitioner is
likewise ordered to pay said respondent exemplary damages
in the amount of ₱25,000.00; and (c) the award of
attorney’s fees and litigation expenses is deleted.
Costs against petitioner.
SO ORDERED.
SAFEGUARD SECURITY AGENCY, INC. vs. LAURO
TANGCO
SECOND DIVISION
G.R. No. 148737 June 16, 2004
ERNESTO PLEYTO and PHILIPPINE RABBIT BUS
LINES, INC., petitioners,
vs. MARIA D. LOMBOY and CARMELA
LOMBOY, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the Decision1 dated October 31,
2000 of the Court of Appeals in CA-G.R. CV No. 61300,
which affirmed with modification the Decision2 dated June
26, 1998 of the Regional Trial Court (RTC) of Dagupan City,
Branch 42, in Civil Case No. 95-00724-D. The RTC ordered
herein petitioners to solidarily pay damages to respondents.
Petitioners likewise assail the Resolution3 dated June 21,
2001 of the appellate court, which denied their Motion for
Reconsideration.
Petitioner Philippine Rabbit Bus Lines, Inc. (PRBL), with
principal office at Tarlac City, Tarlac, is a public carrier,
engaged in carrying passengers and goods for a fare. It
serviced various routes in Central and Northern Luzon.
Petitioner Ernesto Pleyto was a bus driver employed by
PRBL at the time of the incident in question.
Respondent Maria D. Lomboy of Calasiao, Pangasinan, is
the surviving spouse of the late Ricardo Lomboy, who died
in Pasolingan, Gerona, Tarlac, in a vehicular accident at

around 11:30 a.m. of May 16, 1995. The accident was a head-
on collision between the PRBL bus driven by petitioner
Pleyto and the car where Ricardo was a passenger.
Respondent Carmela Lomboy is the eldest daughter of
Ricardo and Maria Lomboy. Carmela suffered injuries
requiring hospitalization in the same accident which
resulted in her father’s death.
On November 29, 1995, herein respondents, as pauper-
litigants, filed an action for damages against PRBL and its
driver, Pleyto, with the RTC of Dagupan City. In their
complaint, which was docketed as Civil Case No. 95-00724-
D, the Lomboys prayed that they be indemnified for the
untimely death of Ricardo Lomboy, his lost earnings, the
medical and hospitalization expenses of Carmela, and moral
damages.
The facts, established during trial and affirmed by the
appellate court, are as follows:
“At approximately 11:30 a.m. of May 16, 1995, PRBL Bus
No. 1539, with Plate No. CVD 556, driven by petitioner
Pleyto, was traveling along MacArthur Highway in Gerona,
Tarlac bound for Vigan, Ilocos Sur. It was drizzling that
morning and the macadam road was wet. Right in front of
the bus, headed north, was the tricycle with Plate No. CX
7844, owned and driven by one Rodolfo Esguerra.”
According to Rolly Orpilla, a witness and one of the bus
passengers, Pleyto tried to overtake Esguerra’s tricycle but
hit it instead. Pleyto then swerved into the left opposite lane.
Coming down the lane, some fifty meters away, was a
southbound Mitsubishi Lancer car, with Plate No. PRS 941,
driven by Arnulfo Asuncion. The car was headed for Manila
with some passengers. Seated beside Arnulfo was his
brother-in-law, Ricardo Lomboy, while in the back seat were
Ricardo’s 18-year old daughter Carmela and her friend, one
Rhino Daba. PRBL Bus No. 1539 smashed head-on the car,
killing Arnulfo and Ricardo instantly. Carmela and Rhino
suffered injuries, but only Carmela required hospitalization.
In their Answer, petitioners PRBL and Ernesto Pleyto both
claimed that the bus was running slowly at the time of the
accident. They pointed out that Bus No. 1539 had been
inspected by driver Pleyto and examined by a mechanic
prior to the trip, in accordance with the company’s standard
operating procedure. It was found in good working
condition. Pleyto claimed that while cruising along the
highway at Gerona, Tarlac, he noticed Esguerra’s tricycle
and followed it at a safe distance after he was unable to
overtake it. Suddenly and without warning, the tricycle
stopped in the middle of the road. Pleyto stepped on the
brakes and the bus lost speed. But, since it skidded towards
the direction of the tricycle, he swerved the bus to the other
lane to avoid hitting it, only to collide with the Manila-
bound Mitsubishi car.
On June 26, 1998, the trial court decided Civil Case No. 95-
00724-D as follows:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiffs and against the
defendants ordering the defendants to pay solidarily the
plaintiffs the following amounts:
1) ₱50,000.00 as indemnification for the death of Ricardo
Lomboy;
2) ₱1,642,521.00 for lost earnings of Ricardo Lomboy;
3) ₱59,550.00 as actual damages for the funeral, wake,
religious services and prayer for the soul of the departed;
4) ₱52,000.00 for the medical treatment and medicine of
Carmela Lomboy;
5) ₱500,000.00 as moral damages for the wife and children
excluding Carmela Lomboy;
6) ₱50,000.00 as moral damages for Carmela Lomboy; and
7) To pay costs.
The filing fee the plaintiffs should have paid is hereby
ordered to be paid by the plaintiffs to the Clerk of Court of
this Court upon satisfaction of the foregoing amounts to the
plaintiffs by the defendants.
SO ORDERED.4
In ruling for respondents, the RTC found Pleyto negligent
and lacking in precaution when he overtook the tricycle with
complete disregard of the approaching car in the other lane.
It found the testimony of Rolly Orpilla credible and
persuasive as against Pleyto’s self-serving and unbelievable
testimony. The court found that Pleyto should have been
more prudent in overtaking a tricycle, considering that it
was drizzling, the road was slippery, and another vehicle
was approaching from the opposite direction. The RTC
found that Pleyto had clearly violated traffic rules and
regulations, and thus was negligent under Article 21855 of
the Civil Code of the Philippines because petitioner Pleyto
failed to present any proof to rebut the presumption. The
lower court likewise held co-petitioner PRBL equally liable
under Article 21806 of the Civil Code for its failure to show
that it had maintained proper supervision of its employees
notwithstanding strict standards in employee selection.
44
Petitioners appealed the judgment of the trial court to the
Court of Appeals in CA-G.R. CV No. 61300. The appellate
court, however, affirmed the decision of the trial court, with
modification in the award of damages, thus:
Wherefore, with the MODIFICATION that the award for
actual damages is reduced to ₱39,550.00 for funeral and
religious services and ₱27,000.00 for medical expenses of
Carmela Lomboy; and the award for loss of earning capacity
is accordingly corrected to ₱1,152,000.00, the appealed
decision is AFFIRMED.
SO ORDERED.7
The Court of Appeals affirmed the findings of the RTC with
respect to Pleyto’s fault and negligence. The appellate court
noted that this was evident in his overtaking Esguerra’s
tricycle despite the drizzle, the slippery road, and an
oncoming car a mere fifty meters away. The court reasoned
that the bus must have been speeding since despite braking,
the bus still hit the tricycle, and then rammed the car in the
opposite lane with such force as to throw the car off the
road. The appellate court also found petitioner PRBL liable
as owner of the bus and as employer of Pleyto pursuant to
Article 2180 of the Civil Code, for its failure to observe the
required diligence in its supervision of its employees and the
safe maintenance of its buses. In modifying the award of
damages, the appellate court took note of the amounts that
were duly supported by receipts only.
Petitioners then moved for reconsideration, but the
appellate court denied it.
Hence, the instant petition, premised on the following
grounds:
A. THE SUPREME COURT MAY REVIEW THE
CONCLUSION DRAWN BY THE COURT OF APPEALS,
NAMELY, THAT THE PRBL BUS OVERTOOK A TRICYCLE
THUS CAUSING THE ACCIDENT, SINCE IT WAS MADE
IN DISREGARD OF FACTS UNDISPUTED BY THE
PARTIES.
B. THE COURT OF APPEALS DISREGARDED THE
DOCTRINE LAID DOWN IN VILLA REY TRANSIT, INC. v.
COURT OF APPEALS, G.R. NO. L-25499, FEBRUARY 18,
1970, 31 SCRA 511, WHEN IT ARBITRARILY PEGGED THE
MONTHLY LIVING EXPENSES AT 50% OF GROSS
EARNINGS.8

At the outset, it appears that petitioners call for this Court to
review the factual findings and conclusions of the Court of
Appeals. Petitioners assail the appellate court’s affirmance
of the finding by the trial court that Pleyto was negligent.
The issue of negligence is factual and, in quasi-delicts,
crucial in the award of damages.9 But it is well established
that under Rule 45 of the 1997 Rules of Civil Procedure, only
questions of law, not of fact, may be raised before the
Supreme Court. It must be stressed that this Court is not a
trier of facts, and it is not its function to re-examine and
weigh anew the respective evidence of the parties.10 Factual
findings of the trial court, especially those affirmed by the
Court of Appeals, are conclusive on this Court when
supported by the evidence on record.11 In the present
petition, no compelling reason is shown by petitioners
whatsoever for this Court to reverse those findings. Our
examination of the records shows that the evidence clearly
supports the following findings of the appellate court:
The negligence and fault of appellant driver is manifest. He
overtook the tricycle despite the oncoming car only fifty (50)
meters away from him. Defendant-appellant’s claim that he
was driving at a mere 30 to 35 kilometers per hour does not
deserve credence as it would have been easy to stop or
properly maneuver the bus at this speed. The speed of the
bus, the drizzle that made the road slippery, and the
proximity of the car coming from the opposite direction
were duly established by the evidence. The speed at which
the bus traveled, inappropriate in the light of the
aforementioned circumstances, is evident from the fact
despite the application of the brakes, the bus still bumped
the tricycle, and then proceeded to collide with the incoming
car with such force that the car was pushed beyond the edge
of the road to the ricefield (Paragraph 8, Affidavit of Rolly
Orpilla marked Exh. "D" and Traffic Report marked Exh.
"E", Folder of Exhibits)....12
Indeed, petitioner Pleyto violated traffic rules and
regulations when he overtook the tricycle despite the
presence of an oncoming car in the other lane. Article 2185
of the Civil Code lays down the presumption that a person
driving a motor vehicle has been negligent if at the time of
the mishap, he was violating any traffic regulation. As found
by both the Court of Appeals and the trial court, petitioners
failed to present any convincing proof rebutting such
presumption.
A driver abandoning his proper lane for the purpose of
overtaking another vehicle in an ordinary situation has the
duty to see to it that the road is clear and not to proceed if
he cannot do so in safety. When a motor vehicle is
approaching or rounding a curve, there is special necessity
for keeping to the right side of the road and the driver does
not have the right to drive on the left hand side relying upon
having time to turn to the right if a car approaching from
the opposite direction comes into view.13
The Court of Appeals found PRBL liable for Pleyto’s
negligence pursuant to Article 2180 in relation to Article
217614of the Civil Code. Under Article 2180, when an injury
is caused by the negligence of a servant or an employee, the
master or employer is presumed to be negligent either in the
selection or in the supervision of that employee. This
presumption may be overcome only by satisfactorily
showing that the employer exercised the care and the
diligence of a good father of a family in the selection and the
supervision of its employee.15
In fine, when the employee causes damage due to his own
negligence while performing his own duties, there arises
the juris tantum presumption that the employer is
negligent, rebuttable only by proof of observance of the
diligence of a good father of a family.16 Thus, in the selection
of prospective employees, employers are required to
examine them as to their qualifications, experience and
service records. With respect to the supervision of
employees, employers must formulate standard operating
procedures, monitor their implementation and impose
disciplinary measures for breaches thereof. These facts must
be shown by concrete proof, including documentary
evidence.17
In the present case, petitioners presented several
documents18 in evidence to show the various tests and pre-
qualification requirements imposed upon petitioner Pleyto
before his hiring as a driver by PRBL. However, no
documentary evidence was presented to prove that
petitioner PRBL exercised due diligence in the supervision
of its employees, including Pleyto. Citing precedents, the
Court of Appeals opined,
"in order that the defense of due diligence in the selection
and supervision of employees may be deemed sufficient and
plausible, it is not enough for the employer to emptily
invoke the existence of company guidelines and policies on
hiring and supervision. As the negligence of the employee
gives rise to the presumption of negligence on the part of the
employer, the latter has the burden of proving that it has
been diligent not only in the selection of employees but also
in the actual supervision of their work. The mere allegation
of the existence of hiring procedures and supervisory
policies without anything more is decidedly not sufficient to
45
overcome such presumption. (Metro Manila Transit Corp.
vs. CA (223 SCRA 521). The trial court ratiocinated: . . .
Indeed, the testimony of the said two witnesses of the PRBL
would impress one to believe that the PRBL has always
exercised the strictest standard of selecting its employees
and of maintaining its vehicles to avoid injury or damage to
the life and limb of people on the road whether of its own
passengers or pedestrians or occupants or other vehicles. It
has not however, shown to the satisfaction of the Court that
it has maintained proper supervision of its employees,
especially drivers while in the actual operation of its buses.
While it has a list of procedures and testing when it comes
to recruitment and another list of what should be done with
its buses before they are allowed to run on the road, it has
no list of procedures and duties to be followed by a driver
while he is operating a vehicle to prevent injury to persons
and damage to property. Neither has it proved to the Court
that there are people employed by it to supervise its drivers
so that it can be seen to it that all the safety procedures to
prevent accident or damage to property or injury to people
on the road have been in place. It is in this aspect of
supervising its employees where this Court has found the
defendant PRBL deficient." (Decision p. 29, Rollo)19
In our view, no reversible error was committed by the Court
of Appeals when it sustained what the trial court found after
trial that PRBL had failed to rebut the presumption of
negligence on its part. Said finding binds us now in this
review on certiorari.
Hence, the only remaining issue relevant for our resolution
concerns the award to herein respondents for damages as
well as the loss of earning capacity of the victim, Ricardo
Lomboy.
Petitioners argue that the award of loss of earning capacity
to respondents is devoid of legal basis. They fault the
appellate court for pegging the monthly living expenses at
50% of gross earnings since, they claim, this runs contrary
to Villa Rey Transit, Inc. v. Court of Appeals,20 which held
that "the amount recoverable is not loss of the entire
earning, but rather the loss of that portion of the earnings
which the beneficiary would have received." Petitioners also
point out that respondents failed to prove the gross income
of the deceased Ricardo Lomboy, thus, making the
computations of the appellate court doubtful, to say the
least.

Respondents counter that the deduction of 50% of the gross
income as reasonable and necessary living expenses by the
appellate court is in accord with established jurisprudence,
pointing to our decision in Negros Navigation Co., Inc. v.
Court of Appeals.21
Petitioners, in our view, misread the Villa Rey Transit case,
where we emphasized that:
"Thus, it has been consistently held that earning capacity, as
an element of damages to one’s estate for his death by
wrongful act is necessarily his net earning capacity or his
capacity to acquire money, "less the necessary expense for
his own living". Stated otherwise, the amount recoverable is
not loss of the entireearning, but rather the loss of
that portion of the earnings which the beneficiary would
have received. In other words, only net earnings, not gross
earning, are to be considered that is, the total of the
earnings lessexpenses necessary in the creation of such
earnings or income and less living and other incidental
expenses."22
In considering the earning capacity of the victim as an
element of damages, the net earnings, which is computed
by deducting necessary expenses from the gross earnings,
and not the gross earnings, is to be utilized in the
computation. Note that in the present case, both the Court
of Appeals and the trial court used net earnings, not gross
earnings in computing loss of earning capacity. The amount
of net earnings was arrived at after deducting the necessary
expenses (pegged at 50% of gross income) from the gross
annual income. This computation is in accord with settled
jurisprudence, including the Villa Rey case.
Petitioners’ claim that no substantial proof was presented to
prove Ricardo Lomboy’s gross income lacks merit. Failure
to present documentary evidence to support a claim for loss
of earning capacity of the deceased need not be fatal to its
cause. Testimonial evidence suffices to establish a basis for
which the court can make a fair and reasonable estimate of
the loss of earning capacity.23 Hence, the testimony of
respondent Maria Lomboy, Ricardo’s widow, that her
husband was earning a monthly income of ₱8,000 is
sufficient to establish a basis for an estimate of damages for
loss of earning capacity.
It is well-settled in jurisprudence that the factors that
should be taken into account in determining the
compensable amount of lost earnings are: (1) the number of
years for which the victim would otherwise have lived; and
46
(2) the rate of loss sustained by the heirs of the deceased. However, while the award of ₱50,000 as moral damages to
Jurisprudence provides that the first factor, i.e., life Carmela Lomboy is sustained, the award for moral damages
expectancy, is computed by applying the formula (2/3 x [80 of ₱500,000 to the heirs of Ricardo Lomboy should be
- age at death]) adopted in the American Expectancy Table reduced for being excessive.
of Mortality or the Actuarial Combined Experience Table of
Mortality. As to the second factor, it is computed by Under Article 2206 of the Civil Code, the spouse, legitimate
multiplying the life expectancy by the net earnings of the children and illegitimate descendants and ascendants of the
deceased, i.e., the total earnings less expenses necessary in deceased may demand moral damages for mental anguish
the creation of such earnings or income and less living and by reason of the death of the deceased.30 However, we must
other incidental expenses. The net earning is ordinarily stress that moral damages, though incapable of pecuniary
computed at fifty percent (50%) of the gross
estimation, are in the category of an award designed to
earnings.24 Thus, the formula used by this Court in compensate the claimant for actual injury and are not meant
computing loss of earning capacity is: Net Earning
to enrich complainant at the expense of defendant.31 Moral
Capacity = [2/3 x (80 – age at time of death) x damages are awarded to enable the injured party to obtain
(gross annual income – reasonable and necessary
means, diversions or amusements that will serve to alleviate
living expenses)].25 the moral suffering he/she has undergone, by reason of the
defendant’s culpable action. Its award is aimed at
It was established that Ricardo Lomboy was 44 years old at restoration, as much as possible, of the spiritual status quo
the time of his death and is earning a monthly income of ante; thus it must be proportionate to the suffering
₱8,000 or a gross annual income (GAI) of ₱96,000.26 Using inflicted.32 Under the circumstances of this case, an award
the cited formula, the Court of Appeals correctly computed of ₱100,000 to the heirs of Ricardo Lomboy would be
the Loss of Net Earning Capacity as ₱1,152,000, net of and justified and in keeping with the purpose of the law and
after considering a reasonable and necessary living expenses jurisprudence in allowing moral damages.33
of 50% of the gross annual income or ₱48,000. A detailed
computation is as follows:
The indemnification award of ₱50,000 is also sustained.
LIVING
NET LIFE EXPECTANCY [2/3 GROSS
EXPENSES
EARNING = (80-age at the time of x ANNUAL WHEREFORE,
– the assailed Decision of the Court of
(50%
Appeals in of
CA-G.R. CV No. 61300 is AFFIRMED, with
CAPACITY (X) death)] INCOME (GAI)
the soleGAI)
MODIFICATION that the award of moral
damages(50%
to thex heirs of Ricardo Lomboy is reduced from
X = [2/3 (80-44)] x [₱96,000 ₱500,000.00
– to ₱100,000.00. No pronouncement as to
₱96,000)
costs.
X = [2/3 (36)] x [₱96,000 – 48,000]
X = 24 x 48,000 SO ORDERED.
X = ₱ 1,152,000.00
Thus, no reversible error may be attributed to the court a
quo in fixing the loss of earning capacity at said amount.
We likewise sustain the reduction of the award of actual
damages from ₱59,550 for funeral and burial expenses of
Ricardo and ₱52,000 for medical expenses of Carmela
Lomboy to ₱39,55027 and ₱27,000, respectively, as only
these latter amounts were duly supported by receipts.28 To
justify an award of actual damages, there must be
competent proof of the actual amount of loss, credence can
be given only to claims which are duly supported by
receipts.29